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To: Les H who wrote (43003)	3/14/2000 5:38:00 PM
From: Les H	Respond to of 99985

Experts say pipeline pressure key for US PPI By Jonathan Stempel NEW YORK, March 14 (Reuters) - Higher energy and tobacco costs drove U.S. wholesale prices solidly higher in February, but signs that higher prices are filtering down to early stages of production, and thus suggestive of future inflationary pressures, are the big worry, Wall Street economists said. ``What will be particularly important is what the core intermediate prices do,' said Joe Lavorgna, senior U.S. economist at Deutsche Bank Securities Inc. ``You want to look for whether oil prices are having spillover effects and whether pipeline pressures are building.' Economists surveyed by Reuters forecast on average that the U.S. Producer Price Index (PPI) rose 0.5 percent in February. It was unchanged in January. They also forecast that core PPI, which excludes the more volatile food and energy sectors, rose 0.2 percent in February, after falling 0.2 percent in January. The U.S. Labor Department is scheduled to release wholesale prices data Thursday at 8:30 a.m. (1330 GMT). A day later, it is scheduled to release data on February consumer prices. Together with Tuesday's scheduled report on January's U.S. trade imbalance, the price reports are the last major data the Federal Reserve's Open Market Committee will have to consider when it meets March 21 and 22. The Fed is widely expected to raise short-term interest rates at the meeting. It is for economists a foregone conclusion that with oil prices soaring to levels not seen since 1991's Gulf War, energy will drive the overall PPI higher. Harvinder Kalirai, senior economist at IDEAglobal.com, said energy goods, which comprise about 14 percent of the PPI, rose 2.0 percent in February, contributing 0.3 percent to an overall PPI rise of 0.8 percent, and a core PPI rise of 0.4 percent. ``What's most important is how oil prices behaved at the start of the month, and there was a significant surge in early February,' he said. Labor tries to capture wholesale price activity as of the Tuesday of the week containing the 13th day of the month--or February 15. Kalirai also said tobacco prices will send PPI higher. ``In January there was an increase in excise taxes, but during the January survey period manufacturers did not increase their prices to reflect that increase,' he said. ``Since that survey was conducted, the taxes have been passed on.' Richard Yamarone, senior economist at Argus Research Corp., expects wholesale prices to rise just 0.3 percent and core prices to slip 0.2 percent, dragged down by metals, lumber and soft goods. He warned against overstating the significance for the Fed of Thursday's data. ``It's no news that crude and energy related goods prices are rising, but that is not the inflation the Fed finds malignant,' he said. ``They're looking at wage pressures or overall price levels. PPI is not really a great gauge of the overall inflation environment for the entire economy. No statistical studies overall prove that producer price rises automatically find their way to consumer prices.' Lavorgna, whose PPI forecast matches the consensus, said, however, the price data remains important because large rises could renew inflation fears in markets expecting U.S. economic growth to slow from last quarter's torrid pace. He said, however, that an unexpected surge in energy prices could, paradoxically, help markets. ``If you're spending more for energy, that's taking away from discretionary spending elsewhere in the economy,' he said. ``You could argue that's a positive in the market.'