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Food and Gas Drove Wholesale Prices Up in May

June 14, 2013 by Leave a Comment

In addition, the Labor Department reported that a rise in food and gas costs drove a measure of wholesale prices up sharply in May. But outside those volatile categories, inflation was mild.

The department also said on Friday that the producer price index rose 0.5 percent in May from April. Gas prices rose 1.5 percent last month, and food costs increased 0.6 percent.

Confidence in the economy has fallen in June to a lower level than economists estimated, according to the Thomson Reuters/University of Michigan survey.

Scott King, senior fiduciary investment adviser at Unified Trust in Lexington, Ky., said that investors were disappointed on Friday by the decline in consumer confidence. He described the economy as “plodding along.”

“Wage growth continues to be pretty meager, and unemployment continues to be lackluster,” Mr. King said.

The Federal Reserve said on Friday that factory production rose just 0.1 percent in May from April, a sign that manufacturing was providing little support for the economy. Output fell 0.4 percent in April and 0.3 percent in March.

Factories produced more autos, computers and wood products last month, offsetting declines in the production of furniture and primary metals.

Manufacturing output has risen 1.7 percent in the last 12 months.

“Manufacturers are still struggling to cope with the ongoing weakness of global demand,” said Paul Dales, senior U.S. economist at Capital Economics.

In wholesale prices, the increase last month came after a 0.7 percent decline in April and a 0.6 percent drop in March, both of which were driven by steep declines in gas prices.

Core prices, which exclude food and energy, rose 0.1 percent in May. That matches the April increase. The index measures price changes before they reach the consumer.

“There really is not much inflationary pressure in the economy,” Mr. Dales said in a note to clients.

Aside from sharp swings in gas prices, consumer and wholesale inflation has increased very slowly in the last year. Both the overall and core indexes have risen just 1.7 percent in the 12 months ending in May. That is less than the Federal Reserve’s 2 percent inflation target, allowing the Fed more latitude to pursue its aggressive policies to spur greater economic growth.

The combination of modest economic growth and high unemployment has kept wages from rising quickly, making it harder for retailers and other businesses to raise prices.

Most of the May increase in food costs stemmed from a 41.6 percent rise in the cost of eggs, the biggest on record. The increase reflected soaring demand in the United States and overseas. The Memorial Day and Mother’s Day holidays, popular occasions for brunch, spurred more demand in the United States, a department spokesman said. And Mexico imported more eggs from the United States in response to a bird flu epidemic.

Nearly two-thirds of the 0.1 percent increase in core prices was caused by a 0.4 percent rise in the wholesale cost of pickup trucks. The housing recovery has created more business for landscapers and contractors, who have bought more trucks.

Article source: http://www.nytimes.com/2013/06/15/business/food-and-gas-drove-wholesale-prices-up-in-may.html?partner=rss&emc=rss

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Consumer Prices Unchanged in December

January 16, 2013 by Leave a Comment

WASHINGTON — Lower gas prices offset more expensive food and higher rents to keep the main measure of consumer inflation flat last month, the Labor Department said Wednesday.

Food prices increased 0.2 percent in December from November. Rents and airline fares also rose. Gasoline prices fell a seasonally adjusted 2.3 percent.

The flat reading of the December Consumer Price Index meant that prices rose only 1.7 percent in 2012, down from 3 percent in 2011. Food prices increased 1.8 percent, down from 4.7 percent in 2011. Energy prices rose slightly.

Excluding the volatile food and energy categories, core prices ticked up 0.1 percent in December compared with November. And core prices rose only 1.9 percent in 2012. That was below the Federal Reserve’s inflation target of 2 percent and it was lower than 2011’s increase of 2.2 percent.

Mild inflation leaves consumers with more money to spend, which is good for the economy. Lower inflation also makes it easier for the Fed to continue with its efforts to accelerate the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

With job gains and economic growth steady but modest, many businesses are reluctant to raise prices for fear of losing customers, and that has helped keep inflation tame. Workers also aren’t able to demand higher wages when growth is weak.

Prices are likely to stay low in the early months of 2013, based on a measure of wholesale prices reported Tuesday.

The Producer Price Index, which measures price changes before they reach the consumer, fell for the third straight month in December. Wholesale food prices dropped by the most in 19 months, largely because of a sharp drop in beef and veal costs. Vegetable and cheese prices also declined.

Separately, the Federal Reserve said factory production in the United States rose in December for the second straight month, buoyed by more output of autos, electronics and business equipment.

The Fed said factory output increased 0.8 percent last month compared with November. That followed a 1.3 percent rise in November, which reflected a rebound from Hurricane Sandy.

Total industrial production increased 0.3 percent in December following a 1 percent rise in November. Production slowed mostly because utility output dropped 4.8 percent, reflecting unseasonably warm weather.

The back-to-back gains in factory output offered some hope that manufacturing could be picking up after a weak year. One area that has been notable strong is the auto industry, which ended 2012 with its best sales in five years. Production of autos and parts grew 2.6 percent in December.

Article source: http://www.nytimes.com/2013/01/17/business/economy/consumer-prices-unchanged-in-december.html?partner=rss&emc=rss

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U.S. Consumer Inflation Subdued, Housing Starts Up

October 19, 2011 by Leave a Comment

The report from the Labor Department showed that the overall Consumer Price Index rose 0.3 percent last month compared with a 0.4 percent rise in August. Gasoline prices rose at a faster pace, while the increase in food prices slowed.

The core C.P.I., which strips out such volatile categories, recorded a 0.1 percent rise in September, its smallest since March, compared with 0.2 percent in August. It was kept in check by some of the prices of its key components, such as rents, which rose moderately, and automobiles, which did not rise at all. The indexes for apparel, used cars and recreation declined.

The report, which reflects seasonally adjusted figures, showed that inflationary pressures were contained despite a rise in wholesale prices. Still, some commodity prices are expected to moderate in the months ahead as lower energy costs start to filter through the data, according to Russell Price, a senior economist with Ameriprise Financial.

“That is the lagging impact of petroleum prices,” he said.

The overall C.P.I. was 3.9 percent in the 12 months to September compared with 3.8 percent in August. Gasoline rose 2.9 percent in September, compared with 1.9 percent the month before. Food prices were up 0.4 percent, compared with 0.5 percent in August.

In the 12 months to September, the core C.P.I. was up 2 percent, the same rate as the 12-month period through August.

“The core prices are starting to show that they are easing,” said Chris Christopher, the United States economist for IHS Global Insight. “So hopefully for consumers in particular prices will start moderating significantly.”

The report also showed that the Consumer Price Index for Urban Wage Earners and Clerical Workers increased 4.4 percent over the past 12 months. That measure is used as a basis, in the third quarter, for cost of living adjustments in Social Security payments, which the government said on Wednesday would reflect an increase of 3.6 percent starting in January, the first adjustment since 2009.

Still, Mr. Christopher noted that actual net checks to retirees would probably not rise by that percentage because of increases in Medicare premiums.

“At least it is mitigating,” he said. “It does not really amount to much.”

Government reports released on Wednesday also provided a glimpse of other sectors of the economy, including the job market and the housing sector, which continues to be challenged by financial pressures on households and a large supply of existing homes.

The Federal Reserve said in its beige book, which is a survey of regional economic conditions, that overall economic activity was expanding in September, although many of the 12 districts described growth as “modest” or “slight.”

The beige book reported limited demand for new employees, although some districts noted difficulties finding skilled workers or said that hiring was hampered by an uncertain outlook for business or lower expectations for future growth. Residential construction remained at low levels, it said, particularly for single-family homes, while there was a moderate increase in the building of multi-family dwellings. In contrast, the report said, rental demand continued to rise.

Those observations were consistent with government statistics that showed housing starts, which reflect the commitment of builders and suggest that consumer spending could follow on durable goods, were up 15 percent, mostly for multiple family units. But there was no significant rise in the trend for the start of construction on single family units.

“This is consistent with reports that homebuilder confidence remains severely depressed,” Joshua Shapiro, chief United States economist at MFR, said in a research note.

Celia Chen, a senior director at Moody’s Analytics, said uncertainty about jobs and problems with foreclosures have affected the single family housing sector. Home values have fallen and it is still difficult for many people to get a mortgage.

“Many of the households forming right now are just not going to have the wherewithal to purchase a home,” said Ms. Chen.

“The ownership market faces many headwinds,” she added. “All the strength we are seeing is on the multi-family side.”

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Gasoline Lifts U.S. Producer Prices

October 18, 2011 by Leave a Comment

The Labor Department said on Tuesday its seasonally adjusted index for prices received by farms, factories and refineries, increased 0.8 percent after being flat in August. Economists had expected prices to increase 0.2 percent.

Stripping out volatile food and energy, wholesale prices rose 0.2 percent after inching up 0.1 percent in August.

“Slower growth abroad suggests further moderation in demand for raw materials heading into the fourth quarter, which will likely translate into inflation moderation,” said Lindsey Piegza, an economist at FTN Financial in New York.

Prices for U.S. government debt trimmed gains on the data.

The dollar briefly pared gains against the euro, while stocks on Wall Street were lower as investors focused on Moody’s warning on France’s credit rating and slow growth in China.

Gasoline prices jumped 4.2 percent, the largest gain since March, after dropping 1 percent in August.

Economists, however, dismissed the spike in gasoline, saying it was attributed to how the data was adjusted to try to smooth seasonal volatility.

“It probably did not point to a new trend to higher inflation,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, Missouri.

But some said there was a risk that data on Wednesday could show an upside surprise in September consumer prices.

The consumer price index likely rose 0.3 percent last month, according to a Reuters survey, after increasing 0.4 percent in August.

INFLATION SEEN CONTAINED

The strong rise in wholesale prices last month is unlikely to spark a broad increase in inflation pressures given the weak economic environment.

It will probably have little impact on the Federal Reserve, which focuses on core consumer inflation, as it weighs further options to help the anemic recovery and pull down an unemployment rate stuck above 9 percent.

Pressure on the U.S. central bank for further monetary stimulus has lessened in recent weeks as retail sales and the trade balance data suggested economic growth accelerated in the third quarter after the second quarter’s tepid 1.3 percent annual rate.

Economists estimate gross domestic product grew at an annual pace of anywhere between 2.3 percent and 2.7 percent in the third quarter.

The economy’s improving tone is starting to filter through to the ailing housing market. Home-builder sentiment rose this month to its highest level in nearly 1-1/2 years, the National Association of Home Builders said in a separate report.

The NAHB/Wells Fargo Housing Market index rose to 18, the highest level since May 2010, from 14 in September. Economists had expected the index to only rise to 15.

Still it remained below 50, meaning more builders view market conditions as poor.

Last month, food prices rose 0.6 percent, slowing from a 1.1 percent rise in August.

In the 12 months to September, producer prices increased 6.9 percent, accelerating from August’s 6.5 percent advance.

Wholesale prices outside of food and fuel were bumped up by a 0.6 percent rise in light motor trucks — accounting for a third of the rise in the core PPI measure. Light trucks had risen 0.1 percent in August.

Passenger car prices fell 0.5 percent after slipping 0.4 percent in August. Disruptions to production wrought by the March earthquake in Japan caused car prices to spike early this year.

In the 12 months to September, core producer prices rose 2.5 percent after increasing by a similar margin the prior month. The rise was above economists’ expectations for a 2.4 percent advance.

(Additional reporting by Ellen Freilich in New York; Editing by Neil Stempleman)

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Wholesale Prices Rose at a Six-Month High in July

August 17, 2011 by Leave a Comment
Opinion »

An Economic To-Do List

In Room for Debate, visions for post-recession America: shorter weeks, more renters, less shopping.

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Truck Dealers Win $2 Billion in Ford Suit

June 11, 2011 by Leave a Comment

Ford said it would appeal the decision that it had violated agreements with about 3,100 dealerships from 1987 to 1998. The judge said Ford used “hidden discounts” and unpublished prices to increase its profits at the dealerships’ expense.

The ruling, by Judge Peter J. Corrigan, of the Cuyahoga County Common Pleas Court in Cleveland, said that Ford made the dealers pay a total of $800 million more than they should have for nearly 475,000 medium- and heavy-duty trucks, including tractor-trailers and bulldozers.

The damages include $1.2 billion in interest and were calculated based on the formula that was used by a jury in February to award $4.5 million to the lead plaintiff in the lawsuit, Westgate Ford in Youngstown, Ohio.

Judge Corrigan upheld the February ruling and added $6.7 million in interest to the jury’s award. “Ford’s breach of its obligation to sell Westgate trucks only at prices published to any dealer,” Judge Corrigan wrote in his ruling, shifted “any surplus in profit from Westgate to Ford.”

Ford, in a statement, said it was confident that the decision would be reversed on appeal and that the judge “committed significant legal errors.”

The company argued that the pricing program at issue in the lawsuit “caused no harm to our dealers. Rather, it brought significant benefit to the dealers.”

But experts hired by the plaintiffs to examine each transaction calculated that dealers paid an average of $1,650 more than the price that Ford should have charged them. In some cases, the dealers were overcharged by up to $15,000, while in others they paid less than the experts said they should have, said James A. Lowe, the plaintiffs’ lawyer.

The lawsuit, filed in 2002, said Ford set wholesale prices on the trucks that were higher than the prices buyers were willing to pay for them. Through a program known as Competitive Price Assistance, the dealers could request discounts from Ford so that they would be able to earn a profit, but each dealer was unaware of how much Ford was discounting the trucks to other dealers. As a result, the prices that dealers paid for identical trucks varied widely.

“The dealers who called to get these special discounts thought they were getting a deal, but they weren’t,” Mr. Lowe said. “No dealer knew what any other dealer was paying.”

Mr. Lowe said Ford’s dealer agreements required it to charge uniform wholesale prices and that the discretionary discounts prevented dealers from knowing what the actual prices were.

“It’s a very straightforward, simple case,” Mr. Lowe said. “Ford had written agreements to sell the trucks at certain prices. It clearly violated that promise.”

Ford sold its medium- and heavy-truck business in 1998.

According to the Web site of his firm, Mr. Lowe and two other lawyers previously won a $10.4 million verdict against Ford on behalf of a woman who became a quadriplegic after her Ford Explorer was struck from behind.

Ford, which earned a $6.6 billion profit in 2010, warned investors in its annual report earlier this year that it could face “substantial” damages if it lost the lawsuit and if the judge applied the formula from the February ruling.

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