Profit, Jobs Data Shouldn’t Distract Fed

Prices of U.S. imports fell modestly in December, retailers’ profits were squeezed in the third quarter and unemployment claims fell in the latest week despite a trend of growing joblessness, government reports showed Thursday.

The mixed bag of financial news added little fresh perspective to the overall picture of a slowing economy. Economists said the data would not distract the Federal Reserve from cutting interest rates, as widely expected, at its next policy-setting meeting at the end of January.

Import prices fell 0.5% in December after a 0.1% gain in November, the Labor Department said in a report that economists had expected to show only a 0.2% drop.

Import prices were driven lower largely by a 9.3% plunge in the price of petroleum imports, while natural and manufactured gas prices soared 32.3%. Excluding petroleum products, import prices rose 0.9% in December after a 0.1% dip in November.

Meanwhile, export prices dropped 0.1% in December after being unchanged in November.

The overall decline in import prices should encourage domestic producers to keep their prices contained, which in turn will help keep domestic inflation muted.

For all of last year, import prices rose 3.5%, after increasing 7.1% in 1999, although much of that gain was due to costlier petroleum. December’s 0.9% rise in import prices, excluding petroleum goods, was the biggest spike on record since the Labor Department began issuing such data monthly in December 1988.

Separately, the Labor Department reported weekly jobless claims fell 36,000 to 345,000 in the week ended Jan. 6, well below the 374,000 expected by economists. But the four-week moving average of the claims data, viewed as more indicative of the trend in the labor market, rose to 363,000 from 356,750 in the previous week.

That left the four-week average at its highest level in more than two years--since it registered 367,250 in July 1998--an indication that tight labor market conditions are easing.

In a third report, the Commerce Department said retailers’ profits fell to 1.4 cents per sales dollar in the third quarter of last year, compared with a downwardly revised 2 cents in the second quarter. That left profits well below the 2.6 cents per sales dollar that large retailers enjoyed in the third quarter of 1999--a sign that shops were forced to discount prices.

The data come as the U.S. economic expansion shows signs of age. Eager to soften the blow of slowing growth, the U.S. central bank last week slashed key short-term interest rates by a half-percentage point. Financial markets widely expect the Fed to cut rates further when policymakers meet Jan. 30.