More Good News on Inflation Expected
Two key gauges of the prices of goods and services due this week are expected to show that U.S. inflation remains tame even though the economy is surging and unemployment is low, analysts said. The producer price index, coming Thursday, probably rose 0.2% in January after rising 0.3% in December, analysts said. Outside of food and energy, the PPI probably increased 0.1% in January, the same as December. On Friday, the consumer price index, or CPI, will likely show an increase of 0.2% in January, the same as December. Outside of food and energy, the CPI probably increased 0.2% in January after rising 0.1% in December, analysts said.
A major reason inflation has been so tame is the ability of businesses to absorb rising commodity costs through greater use of computers and other technology. Worker productivity, for example, surged in the fourth quarter at a 5% pace, capping its best annual performance in seven years. Labor costs fell for a second straight quarter. That helps explain why the PPI and CPI gains are likely to be benign even though the import price index--a Labor Department report due out Wednesday--probably rose 0.6% in January after rising 0.7% during December.
Federal Reserve Chairman Alan Greenspan is likely to offer some observations about the productivity gains among other things when he gives his semiannual economic report to Congress on Thursday before the House Banking Committee.
A variety of other reports are on the agenda this week:
* The Commerce Department is expected to report today that inventories at U.S. businesses probably rose 0.5% in December after increasing 0.9% during November.
* A Fed report Tuesday on industrial production will show that domestic factories are trying to keep up with demand as well. Industrial production probably rose 0.5% in January after rising 0.4% in December. The plant-use rate, meantime, probably rose to 81.5 in January from 81.3 in December, analysts said.
* Starts of new housing construction probably fell 4% in January to 1.643 million units at a seasonally adjusted annual rate amid higher mortgage-interest rates, according to a Commerce Department report scheduled for Wednesday.
* The Commerce Department will report trade statistics Friday that will show the trade deficit probably totaled $26.5 billion in December, the same as November’s monthly record--sending the annual shortfall to a record of more than $260 billion.
