Reports May Bolster Low-Inflation Outlook
This week’s government reports on consumer prices, industrial output and housing construction should reinforce the view that the U.S. economy is growing with little or no inflation, analysts said.
To make sure the economy sticks to that pattern, the Federal Reserve may nevertheless raise the overnight bank lending rate a third time this year when its policymakers meet Tuesday as a sort of insurance against labor shortages and rising wages that could spur inflation. Labor costs account for two-thirds of consumer prices.
On Wednesday, the Labor Department will report October’s consumer price index--a gauge of costs for goods and services. It probably showed little change, rising 0.1%, analysts said. That would follow an increase of 0.4% in September, which was driven by higher oil and tobacco prices. Outside of food and energy, the CPI also probably registered a 0.1% October increase, analysts said. That, too, would point to continued low inflation.
Meanwhile, a Fed report coming Tuesday probably will show that output at the nation’s factories, mines and utilities rose 0.2% in October, erasing a September decline caused in part by Hurricane Floyd, analysts said. The plant-use rate probably showed little change, holding at 80.3% of capacity.
Auto production as well as utility and mining output should help fuel the increase, said analysts at Standard & Poor’s MMS in Belmont, Calif. Regional manufacturing reports from the Federal Reserve banks of Atlanta and Philadelphia will also probably point to growth in heavy industry.
Housing is also holding up well, even with this year’s rise in mortgage rates. Starts of new housing construction for October, due Wednesday, probably increased 0.1% in October to a seasonally adjusted annual rate of 1.620 million after falling 3.2% in September to 1.618 million, analysts said. The Commerce Department is scheduled to issue that report Wednesday.
Other reports due this week:
* A Commerce Department report on business inventories coming today will probably show that they grew in September as retailers struggled to keep up with demand and build stockpiles to head off year 2000-related supply shortfalls. Stockpiles of unsold goods probably rose 0.4% in September after rising 0.3% in August.
* Statistics on the trade deficit in goods and services, due Thursday, probably narrowed in September as export growth outpaced that of imports. The deficit probably shrunk to $22.5 billion in September from $24.1 billion during August.
