<U.S.Economy> PPI up .5%, core rate down .1%
Steven:
Not too bad if you ask me,about time the CRB index showed some signs of life.
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January Producer Prices Rose 0.5%, Biggest Increase in More Than 2 Years
U.S. Jan. Producer Prices Rose 0.5%; Core Rate Fell 0.1%
Washington, Feb. 18 (Bloomberg) -- Prices paid to U.S.
factories, farmers and other producers registered the largest
increase in more than two years in January, reflecting higher
energy and food costs. Outside of food and energy, prices dropped
for the first time in seven months.
The producer price index rose 0.5 percent last month, the
Labor Department said. The core rate of the PPI, which excludes
food and energy costs, dropped 0.1 percent. Analysts expected a
0.2 percent increase in January's PPI and a 0.1 percent increase
in the core rate.
Producer energy prices rose 1.8 percent in January, the
largest increase since December 1996. Food prices increased 1.6
percent, the largest increase since April 1993, and reflected the
largest increase in pork prices in a quarter century.
''Even in a deflationary environment there will be price
increases,'' according to a forecast by economist Ed Hyman's ISI
Group in New York. ''But they represent shifts in relative
prices, not necessarily an increase in the overall level of
prices. What's more, ''In the wake of the Latin American
financial crisis this year, commodity prices are likely to remain
under pressure,'' Hyman's group said.
Report Details
The overall January increase was the largest since a 0.5
percent gain in October 1996. The decline in the core rate was
the first since June, when it also fell 0.1 percent.
Outside of food and energy, computer prices fell 4.5 percent
in January after falling 0.9 percent. Tobacco prices fell 0.2
percent after 26.3 percent in December because of the $206
million tobacco companies' settlement with the U.S., auto prices
decreased 1.2 percent and prescription drug prices rose 1.4
percent after showing little change a month earlier.
Intermediate goods prices increased 0.1 percent
last month. Intermediate goods prices excluding food and energy
fell 0.2 percent.
Crude goods prices increased 2.6 percent in
January. Crude goods prices excluding food and energy rose
0.2 percent.
During December, the PPI increased 0.4 percent and the core
rate rose 1 percent, in both cases reflecting higher cigarette
costs.
For all of 1998, the PPI fell 0.1 percent after declining
1.2 percent a year earlier. It was the first time since the
government began the index in 1947 that the wholesale price
measure fell for two consecutive years.
Oil prices briefly surged in January. Crude oil futures
prices rose above $13 a barrel in mid-January for the first time
since November, and then retreated to around $11.50 a barrel
later in the month.
The outlook suggest oil prices will remain low because of
sluggish global demand and excess capacity. Oil companies
reported lower fourth-quarter profits because of a 38 percent
plunge in the price of crude oil from the year-earlier quarter.
Benchmark Brent crude averaged $11.75 a barrel during the fourth
quarter of 1998, down from $19.02 a barrel the previous year. The
March contract for crude rose 16 cents, or 1.4 percent, to $11.53
a barrel on the New York Mercantile Exchange yesterday.
BP Amoco Plc, the third-largest publicly traded oil company,
yesterday reported a 37 percent drop in fourth-quarter profit,
causing it to accelerate a cost-cutting plan and fire more
workers. The Royal Dutch/Shell Group, the largest publicly traded
oil company, last week posted a 53 percent drop in fourth-quarter
profit. Fourth-quarter profit at Exxon Corp., the second-largest
publicly traded oil company, fell 30 percent, and Mobil Corp.,
the fourth-largest, saw earnings drop 38 percent.
Computers
Computer prices were 26 percent lower in January than the
same month a year ago. Sales at Dell Computer Corp., the No. 1
direct-seller of personal computers, rose a less-than-expected 38
percent in the fourth quarter. Analysts are concerned that the
average selling price for Dell's computers has fallen, hurt by
stepped-up competition from Compaq Computer Corp.
Dell's computer prices fell to about $2,350 in the fourth
quarter from $2,355 in the third, according to Ashok Kumar, an
analyst at Piper Jaffray Inc. in Minneapolis, who had forecast
fourth-quarter prices at about $2,375.
Inflation Outlook
Separately, another Labor Department report showed first-
time claims for state unemployment benefits rose 4,000 to a
seasonally adjusted 288,000 last week. Also, the four-week moving
average for jobless claims fell to 292,000 -- the lowest since
February 1989 -- from 298,750. During the previous week, claims
decreased 11,000, previously reported as a drop of 13,000.
Slower growth worldwide has led to weaker demand and lower
prices for commodities, ranging from oil to copper and beef. Last
week, for example, wheat futures fell 2 percent to a five-month
low on speculation that already weak U.S. exports will see
stiffer competition from the European Union, Australia and other
low-cost suppliers.
Before the next harvest, U.S. granaries will hold the
largest wheat surplus since 1987, the government said, as lower
prices and rising supplies from Europe erode the U.S. share of
the world market.
For now, the Federal Reserve is presiding over an almost
ideal economy with low unemployment and low inflation. ''We have
an economy which is performing exceptionally well,'' Fed Chairman
Alan Greenspan told Congress last week.
Fed policy-makers left interest rates unchanged at their
first meeting of the year, Feb. 2-3, betting that prices stay in
check as the economy benefits from gains in productivity. In the
fourth quarter of last year, non-farm productivity rose 3.7
percent at an annual rate, the fastest pace in almost three
years, Labor Department figures showed Feb. 9.
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