WSJ: "core" rate of inflation,
November 10, 1999ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Wholesale Prices Decline 0.1%,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Amid Falling Energy, Food Costs
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ An INTERACTIVEÿ WALL STREET JOURNAL News Roundup
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ WASHINGTON -- Wholesale prices slipped in October, the first drop in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ eight months, but outside the volatile food and energy sectors prices
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ moved higher than expected.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The Labor Department saidÿÿÿ Wednesday that the producer-price
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ index, which measures inflationÿÿÿÿ pressures before they reach the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ consumer, fell 0.1% in October afterÿÿÿÿ rising 1.1% in September.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Economists surveyed by Thomsonÿÿÿÿ Global Markets anticipated a 0.1%
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ boost in the October PPI.ÿÿÿ However, the "core" rate of inflation,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which excludes the volatile energyÿÿÿ and food categories, rose 0.3%.
ÿÿÿÿÿÿÿÿÿÿÿ Economists were anticipating just aÿÿÿÿ 0.1% increase in the core rateÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ after it grew by a sharp 0.8% in September.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Nevertheless, the decline in wholesale prices, if matched at the consumer
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ level, could ease concerns at the Federal Reserve about a potential
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ outbreak of inflation.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Fed policy makers meet Tuesday to decide whether to increase interest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rates for a third time this year to slow the economy and keep inflation
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ under control. Economists say the odds of another rate increase have been
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decreasing, but it remains a close call and few observers are willing to rule
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ one out. The consumer-price report isn't due for public release until the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ day after the Fed meets.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ Paul Kasriel, chief economist for Northern Trust Co., believes the rise in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the core inflation rate swings the odds back in favor of the Fed increasing
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rates next week. "I think they will tighten by a quarter of a percentage
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ point," he said.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ So far this year, wholesale prices have beenÿ rising at an annual rate of 2.9%, compared
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ with no change for all of 1998. The pickup in this year's wholesale prices has been coming
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ from big increases in energy costs, which had been declining for much of 1998. "It's pretty
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ clear we've seen a turnaround in wholesale inflation this year," Mr. Kasriel said. "If the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Fed wants to prevent that from rising more next year, they will act to raise rates."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Richard Gilhooly, senior bond strategist at Paribas Capital Markets in New York, noted
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that much of the 0.3% gain in the core PPI rate resulted from a 1.1% jump in automobile
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prices. Excluding passenger cars, the core rate climbed just 0.1%, he said.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ "But the question is whether you can legitimately take that [increase in auto
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prices] out," Mr. Gilhooly said. "There has been a huge increase in demand
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for cars and I think it's unlikely to abate any time soon."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Prices ofÿÿÿ prescription drugs also advanced sharply, increasing 1.2% for the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ biggest gain since a 1.3% increase in June 1998.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Energy costs fell by 1%, the biggest drop since a 1.1% decline in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ February. A 5.5% drop in heating oil prices, the largest decline since a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 6.9% drop in February, led the decline in overall energy prices.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Gasoline prices fell by 3.8%, the sharpest decrease since a 7.8% drop in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ December, also contributed to the decline in energy prices. According to a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ nationwide check of gasoline stations by the Lundberg Survey, gasoline
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prices have been on the decline since peaking Sept. 24, at their highest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ average since June 1996. The lower gasoline prices reported in the survey
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ largely reflect a modest decline in crude oil prices.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ However, inventory data released late Tuesday showed that oil and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ gasoline stocks have fallen recently, pushing up prices. Earlier Wednesday,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ brent blend crude-oil futures reached their highest level since January 1997
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ on the International Petroleum Exchange. (See related article.)
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Food prices posted a solid 0.7% decline, the Labor Department said. The
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decline occurred despite crop and livestock damage from hurricanes and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ other bad weather that hit parts of the country in September. The decrease
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ in food prices was led by a 16.3% drop in the price of eggs, the biggest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decline since September 1993, when egg prices fell by 18.9%.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Initial Jobless Claims Decline
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ In a separate report, the Labor Department reported that the number of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Americans filing for unemployment benefits fell by 6,000 claims to 285,000
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ for the week ended Saturday. Economists surveyed by Thomson Global
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Markets expected claims to increase 2,000 from the previous week's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ preliminary level of 288,000, which was revised to 291,000.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ The four-week moving average, a more consistent indicator of claims
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ activity, dropped by 1,000 to 286,750. |
