Price Index Dips, Easing Inflation Fears
Friday, September 10, 2004
WASHINGTON - Wholesale prices dipped 0.1 percent in August as a retreat in food costs
helped to blunt a rise in the price of some energy products, a fresh sign that inflation isn't
currently a problem for the economy.
The decline in the Producer Price Index, which measures costs of goods before they reach store
shelves, came after wholesale costs edged up by 0.1 percent in July, the Labor Department
reported Friday.
Exluding food and energy costs, which can swing widely from month to month, the core prices
also fell in August by 0.1 percent. That followed a 0.1 percent rise the previous month.
The inflation picture painted by the report was better than economists were expecting. They
were forecasting a 0.2 percent rise in overall wholesale prices and a 0.1 percent increase in
core prices.
The latest snapshot of the inflation climate comes as President Bush and his Democratic rival,
John Kerry, offer widely different views over the health of the economy as they try to win over
voters less than two months before Election Day.
In another report, the U.S. trade deficit fell to $50.15 billion in July, but that still represented the
second highest imbalance on record. American exports of cars, airplanes and computers rose
while imports declined for the first time in nearly a year.
The Commerce Department reported Friday that the 8.9 percent improvement in the deficit in
July followed a 16.9 percent surge in June which had pushed the trade gap to a record $55.02
billion.
Federal Reserve Chairman Alan Greenspan, in a Capitol Hill appearance earlier this week, said
worries about an unwanted advance in inflation appeared to have eased recently despite high oil
prices.
He said the economy, which has picked up after a spring lull, would be doing even better if oil
prices hadn't gone up sharply. High energy prices were blamed for the big slowdown in
consumer spending in the April-to-June quarter.
Still, Greenspan and his Fed colleagues have expressed confidence that economic activity would
pick up. Private economists are forecasting growth rates in the July-to-September quarter of 3
percent to just over 4 percent.
Against that backdrop, many economists believe the Fed on Sept. 21 will boost short-term
interest rates for a third time this year, a move aimed at keeping inflation from becoming a
problem.
That would push up a key Fed rate to 1.75 percent, from the current 1.50 percent. By historical
standards, short-term interest rates are quite low, something that some economists fret could
sow the seeds inflation down the road.
Friday's report showed that food prices dropped by 0.2 percent in August, on top of a 1.6
percent decline.
Costs for diary products, beef and veal, chicken and eggs swamped a rise in prices for
vegetables last month.
Prices for energy prices rose a modest 0.2 percent in August, down from a 2.3 percent jump in
July.
A drop in gasoline prices last month helped to blunt a rise in prices for home heating oil,
residential natural gas, residential electric power and liquefied petroleum gas, such as propane.
Friday, September 10, 2004
WASHINGTON - Wholesale prices dipped 0.1 percent in August as a retreat in food costs
helped to blunt a rise in the price of some energy products, a fresh sign that inflation isn't
currently a problem for the economy.
The decline in the Producer Price Index, which measures costs of goods before they reach store
shelves, came after wholesale costs edged up by 0.1 percent in July, the Labor Department
reported Friday.
Exluding food and energy costs, which can swing widely from month to month, the core prices
also fell in August by 0.1 percent. That followed a 0.1 percent rise the previous month.
The inflation picture painted by the report was better than economists were expecting. They
were forecasting a 0.2 percent rise in overall wholesale prices and a 0.1 percent increase in
core prices.
The latest snapshot of the inflation climate comes as President Bush and his Democratic rival,
John Kerry, offer widely different views over the health of the economy as they try to win over
voters less than two months before Election Day.
In another report, the U.S. trade deficit fell to $50.15 billion in July, but that still represented the
second highest imbalance on record. American exports of cars, airplanes and computers rose
while imports declined for the first time in nearly a year.
The Commerce Department reported Friday that the 8.9 percent improvement in the deficit in
July followed a 16.9 percent surge in June which had pushed the trade gap to a record $55.02
billion.
Federal Reserve Chairman Alan Greenspan, in a Capitol Hill appearance earlier this week, said
worries about an unwanted advance in inflation appeared to have eased recently despite high oil
prices.
He said the economy, which has picked up after a spring lull, would be doing even better if oil
prices hadn't gone up sharply. High energy prices were blamed for the big slowdown in
consumer spending in the April-to-June quarter.
Still, Greenspan and his Fed colleagues have expressed confidence that economic activity would
pick up. Private economists are forecasting growth rates in the July-to-September quarter of 3
percent to just over 4 percent.
Against that backdrop, many economists believe the Fed on Sept. 21 will boost short-term
interest rates for a third time this year, a move aimed at keeping inflation from becoming a
problem.
That would push up a key Fed rate to 1.75 percent, from the current 1.50 percent. By historical
standards, short-term interest rates are quite low, something that some economists fret could
sow the seeds inflation down the road.
Friday's report showed that food prices dropped by 0.2 percent in August, on top of a 1.6
percent decline.
Costs for diary products, beef and veal, chicken and eggs swamped a rise in prices for
vegetables last month.
Prices for energy prices rose a modest 0.2 percent in August, down from a 2.3 percent jump in
July.
A drop in gasoline prices last month helped to blunt a rise in prices for home heating oil,
residential natural gas, residential electric power and liquefied petroleum gas, such as propane.
