More deflation news + a few of my sardonic comments<G>
<Wholesale Prices Post Record Drop in Oct.
By Glenn Somerville
WASHINGTON (Reuters) - U.S. wholesale prices plunged at the sharpest rate on record in
October, the Labor Department said on Friday, as a slowing global economy lowered prices
for imported energy and domestic carmakers offered cut-rate financing to lure buyers after
the Sept. 11 attacks.
The Producer Price Index -- a measure of costs at the factory door and farm gate -- dropped a steeper-than-expected 1.6 percent last month, a big reversal from back-to-back gains of 0.4 percent registered in August and September.
The decrease in prices in October sharply exceeded Wall Street economists' forecasts for a 0.4 percent fall and was the biggest slide for any month since the government began keeping records in 1947.
Excluding food and energy products, the so-called core rate of wholesale prices declined 0.5 percent in October -- the sharpest since a 1.2 percent fall in August 1993 -- after a 0.3 percent increase in September.
BONDS RISE ON SIGNS OF WEAKNESS
U.S. bond prices strengthened moderately after the report was issued, as the data added to ample evidence that the economy was likely in recession. U.S. gross domestic product contracted during the third quarter this year at the steepest rate since amid the last recession in 1990-91, and is expected to continue to do so in the current fourth quarter and possibly into the opening months of 2002.
Analysts said any risk of inflation likely has disappeared for the next few quarters, but cautioned it might be too soon to talk about an extended period of price declines.
``I don't think we should jump the gun and start arguing about the risk of deflation yet,'' said economist Anthony Karydakis of Banc One Capital markets in Chicago.
``I think it is important to realize that PPI in particular is a lot more volatile than the CPI (consumer price index) of the inflation measures and is a lot more prone to producing these surprises.''
+++ Uh, right Tony.<lol> Can't declare deflation yet. E Gad, you'd blow prices through the roof on all that low volume long dated corporate fixed income paper that Isopatch been buyin' up during the past 6 weeks. Keep up the good work Tony<G>+++
The October CPI figures, which are taken as a proxy for inflation, will not be issued until next Friday.
Nearly every category of goods was cheaper at the wholesale level in October, but the fall in energy prices was striking.
Gasoline prices plummeted 21.2 percent last month, more than taking back the strong gains of 6.3 percent in September and 8.7 percent in August.
That was the biggest drop in gasoline prices since a 22.1 percent decline in March 1986, and stemmed from the cheaper cost of imported crude oil as waning global demand has forced overseas producers to slash their prices.
+++ .98 cents/gal unleaded regular EVEN in central Ohio. AND IMO it's going even lower.++++
In the automobile category, with the U.S. economy reeling after the Sept. 11 attacks, automakers offered zero-percent financing to woo shocked consumers. New-car prices dropped 4.7 percent in October after rising 1.3 percent in September -- the biggest price decline since a 5.2 percent fall in October 1972, the department said.>
biz.yahoo.com |
