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April, 1985, Vol. 108, No. 4
low during 1984
In 1984, a variety of factors reinforced each other to hold inflation substantially in check as was the case in 1983:
Good harvests for many agricultural crops, both in the United States and abroad;
Continued weakness in world commodity markets for energy and many basic industrial materials;
The unusually high value of the U.S. dollar in international currency markets, which encouraged a surge of imports that averted production and labor bottlenecks by siphoning off much of the upswing in domestic demand;
Weak export demand for most U.S. made goods, also caused in large part by the strength of the dollar;
An excellent year for domestic capital investment projects designed to expand capacity with demand;
Solid U.S. productivity improvements and general wage restraint, both of which held down rises in unit labor costs;
American monetary policies which gave high priority to maintaining a low rate of inflation; and
The slowing of the domestic economic expansion in the latter half of the year.
As a result, inflation in 1984 at both the retail and the producer levels rose at a rate of less than 5 percent for the third consecutive year. This moderate performance coincided with the second year of strong economic recovery from a recession that ended in late 1982.
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