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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (170109)	8/10/2001 10:38:52 PM
From: calgal	Respond to of 769670

Surprise! PPI plunges 0.9% in July Core rate of inflation up moderate 0.2% By Rex Nutting, CBS.MarketWatch.com Last Update: 9:37 AM ET Aug. 10, 2001 WASHINGTON (CBS.MW) - Plunging energy costs pushed the producer price index down 0.9 percent in July, the biggest drop in eight years, the Labor Department said Friday. The core rate - which excludes food and energy costs -- rose 0.2 percent. Food prices fell 0.6 percent, the biggest drop in more than two years. Light truck prices soared 2.3 percent. The drop in the PPI was much greater than the 0.3 percent decline predicted by Wall Street economists surveyed by CBS.MarketWatch.com. The increase in the core rate was close to the 0.1 percent gain expected. Prices of finished goods ready for final sales have now risen 1.5 percent in the past 12 months, the slowest year-over-year increase in two years. Prices dropped all along the production pipeline in July. Prices of intermediate goods fell 1 percent and are now unchanged in the past 12 months. Prices of core intermediate goods fell a record 0.4 percent. Prices of crude materials fell 5.3 percent and are down 5.4 percent in the past year. The report shows that there is no inflationary pressure from the goods side of the economy. A worldwide economic slowdown has forced prices of most commodities lower. "The fall in core intermediate goods prices suggest finished goods prices might even drop outright," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. The government will report on consumer prices, which are more heavily influenced by services, next week. The PPI provides another green light for the Federal Reserve to cut rates further to encourage demand and spending in the economy. If inflation were a threat, the Fed would need to worry that lower rates could pump too much money into the economy and foster greater inflation in the coming months. "The Fed can ease monetary policy without any fear of rekindling inflation," said Thorsten Fischer, an economist at Economy.com. "The back of inflation has been broken for this cycle," said Ken Mayland, president of ClearView Economics. Most analysts expect the Fed to cut its federal funds rate by 25 basis points to 3.5 percent from 3.75 percent on Aug. 21. Futures markets even anticipate a slight chance of a 50-basis-point cut. See full story. In July, prices of foods fell 0.6 percent behind large declines for fresh fruits and vegetables, and for beef and chicken. Consumer goods prices excluding food and energy rose 0.1 percent. Passenger car prices fell 0.3 percent. Prices for capital goods rose 0.2 percent as light truck prices soared 2.3 percent, the biggest increase in 14 years. Rex Nutting is Washington bureau chief of CBS.MarketWatch.com. cbs.marketwatch.com