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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Fun-da-Mental#1 who wrote (25696)	9/14/1999 9:15:00 AM
From: Les H	Respond to of 99985

US DATA PREVIEW: AUG CPI UP ON FOOD, OIL; APPAREL UPSIDE RISK By Marco Babic WASHINGTON (MktNews) - Higher prices for food and gasoline are seen pushing U.S. consumer prices higher in August, with some risk also coming from higher apparel prices, although excluding food and energy, consumer prices are seen remaining tame and perhaps below 2.0% year-over-year for the first time since 1966. The expected increase is showing the same dynamic which pushed the producer prices index headline number higher last week while the core rate declined. Analysts generally point out that price pressures are in a very narrow sector and that core price pressures are relatively benign. The median of a Market News International survey of 23 economists' forecasts is for a 0.3% increase in overall CPI with the core gain projected at 0.2%. Price pressures are evident in the food category, where USDA farm prices increased 3.2% in August after a 4.1% decline in July. At the same time, regular unleaded gasoline prices increased 6.9% to $1.255 per gallon from $1.174 the previous month. Additional evidence of upward price pressure came from the NAPM price index component which rose to 59.8 in August from 54.7 the previous month. Some economists see an upside risk to CPI stemming from apparel prices as the new fall lines begin to enter stores. In July, apparel prices fell 0.9%. At the same time, most other prices are expected to have remained subdued during August, though an increase in tobacco prices looms for September resulting from cigarette price hikes. With the early introduction of fall clothing possibly pushing the CPI higher, "prices of all other goods and services are expected to have remained muted in August," according to Donaldson, Lufkin & Jenrette economist Marilyn Schaja. She added that the CPI data should continue to show that core consumer price inflation remains subdued. "Further restraint will likely come from falling airfares, which are expected to reverse about half of last month's surge," said Lehman Brothers economist Joe Abate. Additionally, Abate said he is looking for a decline in new motor vehicle prices following discounting and sales incentives. According to Credit Suisse First Boston economists Jay Feldman and Mike Cloherty, there could be some "modest downward pressure on the core" from a "residual seasonal pattern" resulting from a shift to a geometric mean methodology earlier this year. They note that the seasonal pattern appears to have shifted slightly, though the Bureau of Labor Statistics still uses the old methodology to seasonally adjust the data. While higher oil prices are expected to push headline CPI higher, a 0.3% increase would still put the year-over-year core CPI under 2.0% for the first time since 1966, according to Feldman and Cloherty. As a result, such an environment of benign inflation will "allow the Fed to return to a watch and wait stance despite strong growth."