WASHINGTON — The economy showed the depth of its twin problems Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.
The Labor Department reported that soaring costs for gasoline and food pushed prices at the wholesale level up by a bigger-than-expected 1.8 percent in June, putting inflation over the past year at its fastest pace in more than a quarter-century.
Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.
Core inflation, which excludes energy and food, was better behaved in June, at 0.2 percent, slightly lower than expectations.
A separate report from the Commerce Department showed that all the economy’s problems were weighing on the consumer. Retail sales edged up 0.1 percent in June, weaker than expected, as consumer spending was held back by a sharp plunge in sales at auto dealerships.
The weak retail-sales performance was a bad sign for future growth, given that it came in a month when the government was pumping out another $28 billion in economic-stimulus payments, bringing the total payments to $78 billion at the end of June.
Analysts said that even this massive infusion of government support was not enough to overcome all the problems weighing on consumers.
“Clearly, the economy is on the ropes with weak employment-market conditions, declining home and equity prices and surging gasoline prices inducing the consumer to pull back,” said Brian Bethune, chief U.S. financial economist at Global Insight.
Wall Street ended a whipsaw day mostly lower as fears of instability in the financial sector kept investors on edge despite a steep retreat in oil prices.
Oil prices plunged — at times, they dropped more than $10 a barrel from the day’s high — on concerns that the economic malaise in the U.S. would stifle demand for crude. It was the third big sell-off in just over a week.
In a third economic report, the Commerce Department said business inventories rose at a slower-than-expected pace in May, a possible indication that the weakening economy is making companies cautious about their restocking plans.
