Core prices hold steady
The Labor Department said Friday that although costlier energy pushed producer prices up 0.7% in April, the so-called core rate at the wholesale level, stripping out food and energy costs, was basically unchanged from March.
It was a sign that inflation, aside from energy costs, remained in check and offered reassurance the economy was slowing in an orderly way.
In fact, the data on producer prices failed to back up the view of the U.S. central bank’s policy-setting committee, which met this week and decided to keep rates steady for now -- citing a potential for inflation to rise.
“Bottom line, today’s data reinforces the view that inflation is contained while the economy is showing signs of a slowdown,” said Alex Beuzelin, an analyst with Ruesch International in Washington. “It also supports the view that the [Federal Reserve] will have to cut rates sometime this year.”
Former Fed Chairman Alan Greenspan, in an address by satellite link to a Singapore audience, said Friday that there was a 1-in-3 chance the U.S. economy could slip into recession this year. That was a repeat of a comment he made in March that rattled markets at the time.
Another report, this one from the Commerce Department, showed that sales by retailers fell 0.2% to a seasonally adjusted $372.03 billion last month, hurt by a one-two punch of soaring gasoline prices and a slumping housing market.
The Commerce Department said in a second report, on March business inventories, that the inventory-to-sales ratio that gauges how long it would take to sell off stocks at the current sales pace dropped to 1.27 months’ worth from 1.29 in February.
The inventories report is a lagging one, but it implied room for companies to keep expanding output.
The producer prices report showed that April prices were up 3.2% from the same month a year earlier. Core producer prices gained 1.5% from April 2006.
April’s retail sales report showed widespread declines in consumer spending including clothing, sporting goods and dining out. New-car sales fell by the largest amount since mid-2006.
