U.S. Economic Reports Likely to Show Inflation Barely Budged Last Month
By Vincent Del Giudice, Monee Fields-White, Vince Golle and Terry Barrett
Inflation Tame Outside of Energy Prices: U.S. Economy Preview
Washington, May 9 (Bloomberg) -- Rising energy prices don't
threaten to accelerate U.S. inflation because they are being
countered by lower prices for other items from clothes to autos,
analysts said.
''Inflation remains, in my view, at least stable, and
possibly still moving lower,'' said Russell Sheldon, chief
economist at MCM MoneyWatch in New York. ''There's no pressure
for companies to raise prices and there's lot of competition
globally.''
Confirmation should come when the Labor Department reports
the producer price index for April on Thursday and the consumer
price index on Friday. The PPI probably increased by 0.5 percent
and the CPI 0.4 percent, according to a Bloomberg News survey.
Analysts see them rising that much because of the highest crude
oil prices in 17 months.
Yet, food prices were probably tame, and excluding food and
energy, the core rate of the price indexes barely moved,
reflecting lower costs for autos, apparel, and industrial
products, analysts said.
In the months ahead ''the core rate is likely to remain
relatively low -- and it's the core rate that matters'' to the
Federal Reserve, said Scott Brown, an economist at Raymond James
& Associates in St. Petersburg, Florida.
What's more, many investors question whether the
Organization of Petroleum Exporting Countries can hold together a
plan to reduce output and bolster oil prices. Higher prices may
lead some exporters to break discipline, bringing prices back
down. Friday, such expectations led crude oil for June delivery
to fall 10 cents to $18.22 a barrel on the New York Mercantile
Exchange.
In March, the PPI increased 0.2 percent and the core rate
showed no change. The CPI for March increased 0.2 percent and the
core rate rose 0.1 percent.
Another, but less followed, inflation report this week will
probably show that import prices moved higher in April, paced by
oil. The Labor Department will release that report Wednesday, and
analysts forecast a 0.5 percent increase in the import price
index for last month following a 0.1 percent increase in March.
Productivity
Another reason for the tame inflation outlook is improved
business efficiency and the introduction of labor-saving
technologies that help keep costs under control. As a result, non-
farm productivity probably rose at a 3 percent pace in the first
quarter, continuing a three-year trend of improvement, analysts
said.
Non-farm productivity is a measure of the time and effort of
providing goods and services. In the fourth quarter, productivity
rose at a 4.6 percent annual pace, the fastest in six years. For
all of last year, productivity increased 2.2 percent, almost
double 1997's 1.2 percent gain.
''The performance of the American economy over the past
seven years has been truly phenomenal,'' said Federal Reserve
Chairman Alan Greenspan said Thursday during a speech in Chicago.
''The breadth of technological advance and its applications has
engendered a major upward revaluation of business assets, both
real and intangible.''
The Labor Department will release the productivity
statistics Tuesday.
In other reports this week:
-- The output of the nation's factories, mines, and
utilities probably increased 0.3 percent in April after rising
0.1 percent in March, analysts said. The Federal Reserve is
scheduled to release the report on Friday. The plant-used rate
probably held steady at 80.1 percent in April.
-- Retail sales probably increased 0.3 percent in April
after climbing 0.2 percent in March, analysts said. The Commerce
Department will publish the figures Thursday. Outside of autos,
sales probably increased 0.5 percent in April, the same as in
March, analysts said.
-- Business inventories probably rose 0.2 percent in March
after increasing 0.4 percent in April, analysts said. The
Commerce Department will release the report Friday.
-- First-time claims for state unemployment benefits
probably declined in the week ended May 8, falling by 4,000 to a
seasonally adjusted 297,000 after rising a week earlier, analysts
said. That would be another sign jobs are plentiful. The Labor
Department is scheduled to issue the claims figures Thursday.
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
5/11 10:00 1Q Productivity 3.0% 4.6%
5/12 10:00 April Import Prices 0.5% 0.1%
5/13 8:30 5/8 Initial Jobless Claims 297K 301K
5/13 8:30 April Producer Price Index 0.5% 0.2%
5/13 8:30 April PPI Ex-food & energy 0.1% 0.0%
5/13 8:30 April Retail Sales 0.3% 0.2%
5/13 8:30 April Retail Sales Ex-autos 0.5% 0.5%
5/14 8:30 March Business Inventories 0.2% 0.4%
5/14 8:30 March Business Sales 0.3% 0.9%
5/14 8:30 April Consumer Price Index 0.4% 0.2%
5/14 8:30 April CPI Ex-food & energy 0.2% 0.1%
5/14 9:15 April Industrial Production 0.3% 0.1%
5/14 9:15 April Capacity Utilization 80.1% 80.1%
Federal Reserve Calendar
Tuesday, May 11
Federal Reserve Bank of Chicago President Michael Moskow
speaks to the German American Chamber of Commerce in Chicago.
Federal Reserve Bank of Cleveland President Jerry Jordan
speaks on ''Economic Infrastructure for a Market Economy'' at the
University of Chicago Graduate School of Business.
Wednesday, May 12
Federal Reserve Governor Laurence Meyer testifies on banks'
regulatory burden before the House Banking subcommittee on
financial institutions and consumer credit.
Thursday, May 13
Federal Reserve Vice Chairman Alice Rivlin speaks to the
Minnesota Meeting on ''The Boom Economy: Why the U.S. is Doing So
Well -- And How We can Sustain It'' in Minneapolis.
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