Who's Who in Meat Guide & Directory

[counter]

001240 Wholesale Prices Rise 0.1 Percent

December 16, 2000

Washington - Wholesale prices posted their smallest increase in three months in November. Lower costs of heating oil and prescription drugs tempered higher prices for natural gas and fresh vegetables.

The Labor Department reported that its Producer Price Index, which measures prices paid to factories, farmers and other U.S. producers for their goods, inched up a slim, seasonally adjusted 0.1% last month, down from a 0.4% rise in October.

The Federal Reserve pushed up interest rates six times between June 1999 and May of this year in an effort to slow the economy and keep inflation under control. Analysts said the more subdued wholesale price increases in November reflected the success of that effort.

“A slowing economy heals all inflation wounds and right now, that is exactly what is happening,” said Joel Naroff, economist with Naroff Economic Advisors.

The report also showed that prices for goods other than food and energy -- which can swing widely from month to month -- were flat in November following a 0.1% decline, suggesting inflation is well contained.

Fed policy-makers meet next week and many economists expect them to change their policy statement away from a tilt toward raising interest rates to a neutral stance. That position would assume the risks of inflation are no greater than the risks of the economy's stalling. Interest rates are expected to be left unchanged.

Fed Chairman Alan Greenspan recently signaled that the Fed stands ready to cut interest rates if the economy shows signs of slipping into a recession.

President-elect Bush and Vice President-elect Dick Cheney have expressed concerns that the slowdown in economic growth may lead to a recession and have said this is a major reason why Congress next year should pass the Republicans' $1.3 trillion tax-cut proposal.

The slim 0.1% rise in the PPI -- the best showing since a 0.4% decline in August -- and the flat rate for goods other than food and energy made for a better reading on inflation in November than many analysts were expecting.

Wholesale prices this year have been rising at an annual rate of 3.9%, compared with 2.9% in 1999. The pickup in this year's prices largely reflects surging energy costs.

But in November, energy prices rose 0.4%, down from a 1.4% increase the month before.

Heating-oil prices fell by 1.9% and residential electric prices decreased 0.7%, helping to blunt higher prices for gasoline, which rose 1.4%, and residential natural gas, which increased by 1.2%.

Crude-oil prices have risen sharply this year as oil-producing nations limited production and U.S. supplies shrank. The rise in natural gas prices reflects tight supply and big demand.

While economists believe that energy price increases will moderate in coming months, that may be of little comfort to consumers likely to face significantly higher heating bills this winter.

Food prices, meanwhile, rose a modest 0.2% in November, after a 0.8% rise the month before. Falling prices for eggs and fruits helped offset higher prices for fresh vegetables, meat and dairy products.

Prescription drugs decreased by 1.6%, the biggest decline since January 1999. Richard Yamarone, an economist with Argus Research Corp., attributed this to a bigger supply of cheaper-priced generic drugs on the market.

In other reports:

-- The United States' deficit in the broadest measure of trade climbed to a record $113.8 billion in the third quarter, reflecting Americans' robust appetite for foreign goods and more expensive imported oil.

-- New claims for state unemployment insurance fell sharply last week by a seasonally adjusted 32,000 to 320,000, but still hovered at a level suggesting that the nation's red-hot labor market was cooling.

Business inventories rose by 0.6% in October as sales fell, another indication that the economy was slowing.

RETURN TO HOME PAGE

Meat Industry INSIGHTS Newsletter
Meat News Service, Box 553, Northport, NY 11768

E-mail: sflanagan@sprintmail.com