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To: bearshark who wrote (16426)	6/8/1999 1:32:00 PM
From: Haim R. Branisteanu	Respond to of 99985

OC commodity-based inflation index fastest in 2 years By John D. Boyd, Bridge News Kansas City--Jun 8--The Journal of Commerce newspaper's industrial price index, which is designed to predict overall US inflation trends based on the costs of raw materials needed by factories, today moved out of a nearly 2-year deflation run to hit its highest growth rate since Aug 19, 1997. This week's rebound in crude oil prices was part of the index surge, but more significantly the energy price was joined by gains in a wide range of other input costs. * * * The JOC index is still signaling fairly muted inflation pressures because its annualized growth rate today barely edged above zero to read just a 0.184% positive pace. But the index has moved up rapidly this spring; as recently as Apr 12 it showed a deflationary growth pace of -9.52%. This tool was designed so that its growth rate would serve as a predictor of basic cyclical shifts in the pattern of overall US inflation, as measured in the consumer price index. The JOC index has a lead time of roughly 6 to 9 months in foretelling trend behavior moves in how the CPI performs, but is not designed to predict actual CPI growth rates. The JOC calculates its index once a day, computing new prices from various listing sources for up to 17 separate industrial commodities. Some of those prices are updated daily, some less frequently and a couple have sat unchanged for months at a time. They were all chosen initially because each had a historical tendency to predict shifts in the CPI, and the large number of inputs tracked limits the potential for the gauge to overreact to any single commodity. Today, though, prices pushing the JOC measure over the top into a positive inflation zone were oil, plywood, hides used for heather-making, tin, lead,copper, cotton, plywood and red oak flooring board. While the wood-price gains reflect a sizzling construction market and oil the newfound solidarity for production cutbacks among oil-exporting nations, the array of other price gains would be in line with a recovery under way for the manufacturing sector. The price change for red oak was the first figured into this index in a long time, but is in line with the recent surge for plywood. Chart-loving technical analysts closely monitor the index level rather than the growth rate, as a way to predict future moves in the gauge itself. A daily Bridge News technical analysis (Story .1444) this morning had pegged the index as poised to start another move higher. It also cautioned that overbought conditions could stall some upward progress, but emphasized that the JOC had hit a major bottoming trough back in March. The index flirted with breaking its long negative growth pace in mid-May, at a time when prices of various basic raw materials were rising along with oil. Of special concern to some economists, including some with in the Federal Reserve system who keep an eye on the JOC gauge, is what happens to metal costs. Metals were rising back then, but had since settled. Oil relaxed after a fast run-up. So the index for a while moved sideways in a zone where its growth rate hovered around -1.5% to -3%, with the index level at 91 or a bit below. But so far in June the index level went from 90.57 on Jun 1, with a -2.58% pace, to a level Monday of 91.21 and a growth rate of -1.02%. Today's level rose to 91.75, the strongest since last Nov 2. Even though today's broad price gains boosted the index, not all the JOC components point toward higher inflation. For instance, the metals group sent mixed signals today as both aluminum and zinc were figured in with lower prices while copper, lead and tin all rose but remained safely below their recent highs. Benzene, a base chemical widely used in further processing activities, posted its lowest price in at least 3 weeks. Rubber did not change in today's JOC formula, but it has come off its highs. End Bridge News, Tel: (913) 323-8046 Send comments to Internet address: econ@bridge.com Jun-08-1999 13:22 GMT Source [B] BridgeNews Global Markets Categories: E/INF E/MFG N/ANL R/US R/NME CAP/ECON COM/AGRI OV/GEN CAP/INDEX COM/GRAIN COM/SOY COM/LIVE COM/TEXTILE COM/SOFTS