Economy Posts Continued Modest Gains

PRODUCER prices fell 0.2 percent in July after a 0.3 percent decline in June, the Labor Department reported yesterday. It was the first back-to-back monthly decrease in two years and represents one of the few benefits of the economy's lackluster growth. July's drop stemmed mainly from lower energy costs.

The Commerce Department said yesterday that retail sales rose 0.1 percent in July, restrained by a big decline in auto purchases. The Labor Department said yesterday that first-time claims for unemployment benefits fell by 3,000 to a seasonally adjusted 332,000 last week, indicating essentially unchanged conditions in the job market.

"One of the luxuries we have in the economy right now, despite all our problems, is that a resurgence in inflation is not in the cards," said economist Jeff Thredgold of KeyCorp in Albany, N.Y. "Given the relative economic weakness, both domestically and globally, it's very difficult for anyone to sustain price increases."

So far this year, the annual wholesale inflation rate is 1.8 percent, little changed from the 1.6 percent rate in 1992.