Preview : Tame Producer Price Data Seen
The producer price index for August highlights the list of U.S. economic indicators to be released this week, and it’s likely to show little evidence of accelerating inflation, analysts said.
If that’s the case, the report should ease investors’ concerns that Federal Reserve policymakers are poised to raise interest rates again to slow the economy and head off rising inflation when they meet Oct. 5.
“There’s nothing between now and Oct. 5 that should trigger anything” by the Fed, said Astrid Adolfson, an economist at MCM MoneyWatch in New York.
The PPI number will be released Friday, and it probably increased 0.3% last month after rising 0.2% during July, analysts said. The core rate of the PPI, which excludes food and energy, probably rose 0.1% after showing no change a month earlier.
Investors may get a hint of Fed officials’ thinking before Friday, however, as Fed Chairman Alan Greenspan, New York Fed President William McDonough and other central bankers are scheduled to give speeches Wednesday and Thursday.
“The big story with the PPI is oil again,” said Christopher Low, an economist at First Tennessee Capital Markets in New York.
Earlier this year, members of the Organization of Petroleum Exporting Countries, seeking to reduce a world oil glut, agreed to cut production by 4 million barrels a day. That, in turn, triggered an 80% surge in crude oil prices.
Yet, after energy and food prices are taken out, the PPI core rate could be “surprisingly low,” largely because of big discounts for automobiles, Low said.
Ford Motor Co., for example, said its U.S. sales of cars and light trucks rose 7.6% in August, capping the industry’s best month in almost 13 years as discounts cleared the way for new models. Computer prices are also falling amid intense competition and technological advances.
And while energy prices are rising, overall food prices have been tame. August farm prices, for example, fell 3% from August 1998, reflecting lower prices for soybeans, broilers and lettuce, according to Department of Agriculture statistics.
A tame PPI would come just a week after the government reported a slowdown in employment growth and average hourly earnings during August. The economy added 124,000 jobs last month, fewer than the July gain of 338,000. Workers’ average hourly earnings rose 0.2% to $13.30 in August. That followed an increase of 0.3% during July, smaller than the previously reported 0.5% gain.
“There are no visible wage pressures,” said Bruce Steinberg, chief economist at Merrill Lynch & Co. in New York, even with the unemployment rate tying a 29-year low at 4.2% last month.
In other reports due this week:
* The Commerce Department is expected to report Wednesday that inventories at the nation’s wholesale businesses increased 0.3% in July, the same as in June, analysts said. Wholesale sales also probably increased, though at a slower pace than a month earlier, analysts said.
* The Fed is expected to report Wednesday that consumer credit increased by $5.9 billion during July after increasing $2.8 billion in June, analysts said. The increase is likely to reflect strong demand for autos, analysts said.
* The Labor Department is expected to report Thursday that first-time claims for state unemployment benefits rose by 4,000 to a seasonally adjusted 293,000 in the week ended Saturday after rising 4,000 the previous week to 289,000, analysts said.
