Econ--The Post: "Basis Points" + "3 Reports Confirmed Slowing Economy"
washingtonpost.com
washingtonpost.com
----------------------------------------------------------------------------------------------------------
Full text:
Edited for ease of reading.
>>>Basis Points
By John M. Berry
Sunday , October 15, 2000 ; Page H02
The bond market was surprisingly stable last week despite turmoil in the Middle East, including the attack on the U.S. ship in Yemen and major declines in the stock market indexes. Perhaps so many things were going on that traders didn't know which way to move.
News that producer prices rose more than expected, primarily because of surging oil prices, and that retail sales were stronger than predicted had only a small impact on the market Friday.
Over the course of the week, the yield on 30-year U.S. Treasury bonds fell a few basis points, to 5.80 percent. Some analysts believe there is a potential for at least a small rally if worry about Middle East events causes investors to move money into treasuries in what is known as a flight to safety.
Tomorrow Treasury will sell $11 billion in three-month bills and $10 billion in six-month bills. In when-issued trading Friday, the bills yielded 6.20 percent and 6.21 percent, respectively.
© 2000 The Washington Post <<<
----------------------------------------------------------------------------------------------------------
>>> 3 Reports Support View That Economy Is Slowing
By Steven Pearlstein
Washington Post Staff Writer
Saturday , October 14, 2000 ; Page E01
A trio of reports out yesterday generally confirmed a picture of a slowdown in the record-long expansion of the U.S. economy, with inflation pressures growing, consumer confidence inching down and consumers demanding price discounts that have begun to cut deeply into corporate profits.
The Labor Department reported that producer prices rose an unexpectedly large 0.9 percent in September, the biggest jump in seven months.
Autos posted their biggest monthly price increase in five years, 1.4 percent, while food costs rose for the first time in five months. Gasoline prices soared 9.3 percent.
Even without the volatile food and energy sectors, the core inflation rate for producer prices was up 0.3 percent, more than double the rate in recent months.
According to Kathryn Kobe, senior economist at forecasting firm Joel Popkin & Co. in Washington, one factor in the overall inflation picture is that the prices of computers and other high-tech equipment have been falling less steeply. Last September, for example, the price of computers fell 2.2 percent; this year it was 0.3 percent.
Overall, producer prices have increased at a 4.1 percent annual rate through September, compared with 2.9 percent for all of 1999. For core inflation, it's been 1.4 percent, compared with 0.9 percent last year.
While rising producer prices are often an early warning of future inflation, there are indications that at least some of the increase in wholesale prices is being absorbed by corporations in the form of lower profits rather than passed on to consumers in the form of higher retail prices.
There were hints of that yesterday in another report from the Commerce Department showing that retail sales had jumped 0.9 percent in September, largely on the strength of increased car sales and higher prices for gasoline.
"What it says is that consumers are still spending," said David Wyss, chief economist at Standard & Poors DRI, a Lexington, Mass., economic forecasting and consulting firm. "But once you take out autos and gasoline, the rest of the retail sector is running a bit slower than it had been."
September's sales increase was led by a car-buying spree fueled by end-of-the-model year discounts and cash rebates reaching $3,000 for family minivans and light trucks. Car and truck sales last month were running at an annualized rate of slightly less than 18 million, close to an industry record.
Thanks to price promotions, sales at furniture and clothing stores were also up smartly. But sales at building-material outlets fell 0.7 percent, reflecting a slowdown in home construction, while gains at food and general merchandise stores were up hardly at all, after discounting for inflation.
"Overall, the numbers look pretty strong, but if you look at some of the underlying data there are clear signs of weakness," said Carl Steidtmann, chief retail economist for PricewaterhouseCoopers. He noted that growth in high-ticket items have been cut in half as sales have slowed dramatically for such things as computers, consumer electronics and home appliances.
Meanwhile, the University of Michigan reported that its index of consumer sentiment continued its gradual, yearlong decline. Analysts said the September report reflects a growing belief among Americans that while jobs and income are good right now, the future looks less sure. Rising prices for goods and falling values of their stock holdings are cited as reason for the decreased optimism.
An index of personal financial prospects remained at a three-year low while another gauge, of consumers' eagerness to buy big-ticket items, rose because of the availability of price discounts and fears that prices will rise in the future.
© 2000 The Washington Post <<< |
