Consumer prices rose a moderate 0.2 percent in September despite the biggest jump in energy costs in five months.

The rise in the Consumer Price Index, the government's most closely watched inflation gauge, was in line with economists' expectations and followed a 0.3 percent increase in August and a 0.1 percent gain in July.

The government report released Friday showed that energy costs shot up by 0.7 percent in July, led by a 1 percent surge in gasoline pump prices. Energy costs have accelerated in the past three months, reflecting in part growing concerns that a possible U.S. war in Iraq will disrupt global oil supplies.

With the release of the September CPI, the government was able to announce that millions of Americans recieving Social Security benefits will see their checks increase by 1.4 percent next year which will mean an additional $13 a month in benefits for the average retiree, pushing his monthly check to $895.

The Social Security adjustment, based on measuring the increase in consumer prices from the third quarter of last year to the third quarter of this year, is the smallest since a 1.3 percent rise in 1999 and reflects the depressing effects the weak economy is having on prices.

Most analysts believe that the jump in energy costs will not be enough to cause a large acceleration in the overall inflation rate as prices elsewhere will continue to be held back by the inability of businesses to hike the costs of their products.

In another report, the Commerce Department said the U.S. trade deficit swelled to a record $38.5 billion in August, reflecting Americans' heavy appetite for foreign-made clothes, cars and TVs.

The trade deficit was a sizable 9.7 percent higher than the $35.1 billion trade gap reported for July, the report said.

The Labor Department reported that consumer prices from January through September were rising at an annual rate of 2.6 percent this year, compared to a 2.7 percent rate of increase for the same period last year.

Many analysts believe that moderate inflation will continue for some time to come as the economy struggles to mount a sustained recovery in the face of the steep plunge in stock prices, falling consumer confidence, a weak job market and rising anxieties about a possible war with Iraq.

The absence of inflation has allowed the Federal Reserve to keep its key interest rate at a 40-year low of 1.75 percent since last December. Many economists believe the Fed may actually cut rates further next month to make sure that the fledgling recovery doesn't falter and push the country back into recession.

For September, the 0.7 percent rise in energy prices followed a 0.6 percent increase in August and was the biggest one-month jump since a 4.5 percent surge in April. Energy prices had actualy retreated a bit in May and held steady in June before rising Middle East tensions started pushing crude oil prices higher.

Food prices were up a moderate 0.2 percent in September after having fallen by 0.1 percent in August. The overall figure was held back by a big 2 percent decline in pork prices, the biggest monthly decrease in this category since May 1989.

Outside of the volatile food and energy sectors, the so-called core rate of inflation was up just 0.1 percent in September, an improvement over the 0.3 percent rise in core inflation in August. For the first nine months of this year, core inflation is rising at an annual rate of 2.1 percent, slower than the 2.8 percent rise during the same period last year.

Clothing prices, which had jumped a sharp 1.1 percent in August, moderated to a tiny 0.1 percent rise in September.

Medical care costs, which have been rising faster than most other categories, were up 0.3 percent in September after a 0.2 percent August increase.

In good news for parents, education costs dipped by 0.2 percent in September after a 0.7 percent surge in August.