DEFLATION! April wholesale prices registered the biggest decline in at least 56 years,
highlighting the Federal Reserve's concern about the economy facing a
deflation risk for the first time since the Depression. The producer-price
index declined 1.9% last month. The decline partly reflected falling oil
prices. But excluding volatile food and energy items the index dropped 0.9%
-- the biggest drop in a decade.
Wholesale Prices Slide 1.9%,
The Biggest Drop on Record
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
WASHINGTON -- Wholesale prices registered the biggest decline in at least 56 years in April, highlighting the Federal Reserve's worry that the economy faces a deflation risk for the first time since the Great Depression.
The producer price index for finished goods declined 1.9% last month, after a 1.5% rise March, marking the biggest decline since the government began the index in 1947, the Labor Department said Thursday.
That partly reflected falling oil prices in the aftermath of the U.S. invasion of Iraq. But the core index, which excludes volatile food and energy items, still fell 0.9%. That was the biggest drop in a decade for that gauge.
The overall decline in producer prices was more than double the 0.8% economists had expected, according to a survey by Dow Jones Newswires and CNBC. Economists pegged the core index's slide at 0.1%.
In a separate report, the number of workers filing first-time applications for unemployment benefits dropped for a third consecutive week.
Initial jobless claims fell by 13,000 to a five-week low of 417,000 last week, the Labor Department said Thursday. The four-week moving average, which smooths out weekly fluctuations, fell to a one-month low of 439,750.
Economists had expected an increase of 3,000 initial claims, according to a survey by Dow Jones Newswires and CNBC.
The report was a small dose of good news for the anemic labor market, but claims have remained above the 400,000 mark, a level associated with a weak job market.
A third report showed that the pace of inventory accumulation slowed in March, suggesting businesses remain cautious about the economic outlook.
Business inventories rose 0.4% to a seasonally-adjusted level of $1.17 trillion, following a revised 0.7% gain in February, the Commerce Department said. February inventories were previously estimated as a 0.6% increase.
Still, the March increase was larger than expected. A consensus of economists pegged the rise in inventories at 0.2%.
Business sales climbed 1.8% -- the largest rise in almost a year -- after a 0.9% decline in February. Because sales rose faster than inventories, the inventory-to-sales ratio dropped to 1.38, from a revised 1.40 in the previous month. February's ratio was previously estimated at 1.38. The inventory-to-sales ratio, an indicator of how well firms are matching supply with demand, measures how long it would take in months for a firm to sell all of its current inventory.
Producer prices fell in most major categories, including record declines in gasoline and home-heating oil prices, good news for businesses and consumers, who have felt the strain of higher energy prices at the pump. Energy prices dropped 8.6%, the biggest decline in 17 years. Gasoline prices tumbled 22.3%, the biggest slide on record.
The drop in core wholesale prices reflected falling prices for cars, trucks, men's and boy's clothes and cigarettes.
Prices of capital equipment slipped 0.5%, while passenger-car prices fell 2.6%, the biggest decline in 19 months. Prices of light motor trucks -- which include sport utility vehicles -- registered a 4.6% decline that was the biggest in more than 21 years. Computer prices declined 0.3%.
But food prices climbed 0.9%, and prices of pharmaceutical products rose 0.8%, the biggest increase in three months.
Updated May 15, 2003 9:05 a.m. |
