U.S. Producer Prices Rose 0.1% in October; Core Index Unchanged
By Joe Richter
Nov. 14 (Bloomberg) -- Prices paid to U.S. producers rose in October at a slower pace than forecast, suggesting the full effect of a jump in energy costs had yet to register.
The 0.1 percent increase followed a 1.1 percent gain in September, the Labor Department said today in Washington. So- called core producer prices, which exclude fuel and food costs, were unchanged after a 0.1 percent gain in September as prices of light trucks and computers declined.
A drop in energy costs early in the month will probably be reversed in November inflation reports. So far, companies facing more competition and a slowing economy have been reluctant to risk losing market share by raising prices on finished goods. Federal Reserve Chairman Ben S. Bernanke said last week that policy makers ``will respond as needed'' to support growth and keep inflation stable.
``Outside of energy, prices are relatively stable or even coming down in some cases,'' Russell Price, senior economist at H&R Block Financial Advisors in Detroit, said before the report. ``It's getting harder for manufacturers and service providers to pass costs along as demand declines.''
Economists had forecast producer prices would rise 0.3 percent, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from a 0.3 percent decrease to a gain of 1.3 percent.
Core prices were forecast to rise 0.2 percent.
Over the past 12 months, producer prices rose 6.1 percent, compared with a 4.4 percent rise in the 12 months through September. Producer prices excluding food and energy rose 2.5 percent for the 12-month period.
Energy costs fell 0.8 percent after rising 4.1 percent in September. Costs for gasoline fell 3.1 percent. The timing of the survey may account for the declines because most of the recent jump in energy prices took place in the latter half of October, after the survey was completed, economists said. The government, in calculating wholesale prices, asks survey participants to report costs as of the Tuesday of the week that includes the 13th.
Crude oil futures on the New York Mercantile Exchange averaged $85.26 a barrel in October, up from $79.63 in September. They reached a record $98.62 a barrel on Nov. 6.
American Airlines and three major rivals last week added a $10 charge on U.S. round-trip fares, matching United Airlines, to help make up for surging jet-fuel prices. The charge covers leisure fares and business tickets purchased less than 14 days before travel.
``Since fuel prices affect airlines across the board, consumers should expect prices to continue to increase,'' Rick Seaney, chief executive officer of Dallas-based FareCompare.com, said in an e-mailed statement. Fares now are 5 percent to 7 percent more than summer 2006 highs, Seaney said.
Costs of intermediate goods, such as steel used in earlier stages of production, rose 0.1 percent in October, after a 0.4 percent rise in September. They were up 5.6 percent from a year ago.
Excluding food and energy, intermediate prices rose 0.1 percent. Prices for raw materials, or so-called crude goods, rose 2.4 percent.
Auto prices rose 1 percent after falling 1.8 percent in September. Prices of light trucks fell 2.7 percent. The wide swing in auto prices may be related to difficulties in adjusting for seasonal variations as automakers roll out new models, economists said.
Computer prices fell 1.3 percent.
The cost of consumer goods rose 0.1 percent. Food costs rose 1 percent, while prices for capital goods fell 0.1 percent.
Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, reported its fourth consecutive loss after competition from Intel Corp. drove down chip prices.
Trading in Fed funds futures suggests investors expect the Fed to cut its benchmark lending rate again next month by a quarter-point. Central bankers cut their benchmark rate 0.75 percentage point to 4.5 percent over two meetings during in September and October.
The Fed's preferred price gauge, which is tied to consumer spending and excludes food and energy costs, will probably rise 2 percent this year, according to the Bloomberg survey. Some policy makers, including Bernanke before becoming chairman, have said they'd like to see core inflation within a 1 percent to 2 percent range.
The producer-price report is the second of three monthly inflation gauges. The government said on Nov. 9 that import prices jumped 1.8 percent in October, the most in 17 months, as oil prices neared a record. Prices excluding energy rose 0.5 percent on higher costs for natural gas, metals and food. Results for consumer prices will be issued tomorrow.
To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net
Last Updated: November 14, 2007 08:30 EST |
