> BLS DAILY REPORT, MONDAY, OCTOBER 18, 1999:
>
> Jumps in tobacco, auto, and energy prices hike September's producer price
> index 1.1 percent -- the largest leap in 9 years, according to data
> released October 14 by BLS. Producer prices for finished goods increased
> 1.1 percent in September, after rising 0.5 percent in August. The
> so-called core PPI that excludes energy and food prices increased 0.5
> percent after decreasing 0.1 percent in August. Economists are split over
> the leap's implications. Excluding energy and food prices, the PPI
> increases 0.8 percent, but when tobacco and auto prices are also excluded,
> producer prices rose only 0.1 percent in September (Daily Labor Report,
> page D-1).
> __Prices paid to producers rose an unexpectedly sharp 1.1 percent in
> September, the Labor Department reported yesterday, raising concern about
> inflation in financial markets and sparking a broad sell-off on Wall
> Street. But, according to may analysts and some policymakers, the
> long-running U.S. economic expansion is not headed for serious trouble.
> Interest rates are on the upswing, these analysts say, precisely because
> the economy remains strong, but they foresee no big breakout of inflation.
> And the decline in stock prices has so far come in the form of an orderly,
> gradual correction, not a sudden crash. Even the producer prices report
> reflects seasonal and other anomalies that are likely to be reversed in
> the coming months.(John M. Berry, writing in The Washington Post, page
> E1).
> __Prices at the producer level shot up 1.1 percent in September, the
> biggest monthly increase in 9 years, the Government reported today. The
> report stoked fears among investors that inflation might be accelerating
> and helped to set off a wave of selling on Wall Street which was already
> jittery over comments on Thursday night by Alan Greenspan, the Federal
> Reserve Chairman, about the difficulty of determining whether stock prices
> are too high. Analysts said the increase in the Producer Price Index,
> while nearly three times what had been anticipated, overstated any
> inflation threat. The rise in the index, they said, was largely driven by
> increases in a few categories, including oil, tobacco, and automobiles.
> But the jump in the price index was substantial enough that it increased
> the odds of the Federal Reserve's raising interest rates at its next
> meeting on November 16. The so-called core price index, which excludes
> food and energy, rose 0.8 percent in September, after being roughly flat
> for most of the year (Richard W. Stevenson in The New York Times, October
> 16, page B1).
> __Consumers know they're paying sharply higher prices for gasoline and
> food, two things its hard to do without. Prices at the gas pump have
> rocketed 30 percent this year, the Energy Department said earlier this
> month. Wholesale food prices jumped from 9 percent for blueberries,
> applies and oranges to 10 percent for pork last month, the Labor
> Department said Friday. On Tuesday, the government reports what consumer
> prices did last month, and investors are nervous. After two consecutive
> months of 0.3 percent increases in the CPI economists estimate that prices
> rose 0.6 percent in September. Excluding volatile food and energy prices,
> they expect that consumer prices rose 0.5 percent last month. Consumer
> prices rose 2.6 percent through August vs. 1.6 percent for all of 1998.
> But most of that increase is because of energy prices, which rose 15.4
> percent the first 8 months of the year compared with an 8.8 percent
> decline last year. Friday's massive stock-market sell off was partly
> triggered by a government report suggesting price increases are spreading
> to products and services beyond food and energy. Two charts illustrate
> the article, the data for both of which are attributed to BLS. They
> include average hourly earnings of production workers, 9/98 to 9/99, and
> the producer price index, measuring the wholesale prices received by
> factories, farms and refineries, 9/98 to 9/99 (USA Today, page 2B).
>
> "So has the New Economy slain inflation, or not?" asks Jacob M.
> Schlesinger in The Wall Street Journal (page 1). The optimists say the
> forces of globalization and digitalization are having a powerful
> deflationary effect. One element of this story is the Internet, which
> advocates say, has changed the balance of power between buyers and
> sellers. No longer can the corner druggist or the local mall's bookshop
> demand huge markups for their wares. Shoppers have two powerful new
> weapons -- information about what competitors around the country are
> charging for the same goods, and easy access in those goods online if the
> nearby merchant won't deal. But Friday's chilling inflation report for
> September -- showing the biggest monthly increase since 1990 -- bolstered
> the pessimists in this central economic debate. Friday's wholesale price
> numbers did little to settle the debate. Temporary factors fueled
> September's increase in prices for cigarettes, autos, food and energy.
> But the strong numbers raise anew the question of whether inflation's
> quiescence in recent years has been an aberration or the result of
> fundamental changes in the way the economy operates.
>
> The average rate on 30-year fixed-rate mortgages edged over 8 percent on
> Friday, an indication that the economic tumult of the week is being
> reflected in home financing costs, says USA Today (page 8B). The daily
> survey of 400 lenders by HSH Associates showed an average rate of 8.01
> percent at week's end, up from 7.95 percent Thursday.
>
> The CPI for September, to be released by BLS tomorrow, is predicted to
> show a 0.4 percent increase, according to the Thomson Global Forecast as
> published in "Tracking the Economy," a Wall Street Journal feature (page
> A8). The previous actual increase was 0.3 percent. The CPI excluding
> food and energy figure is predicted to be an increase of 0.3 percent,
> compared to an increase of 0.1 percent in August.
>
> The total output of the U.S., industrial sector -- factories, mines, and
> utilities -- declined 0.3 percent on a seasonally adjusted basis in
> September, according to the Federal Reserve. The modest decrease followed
> a 1 percent rise in industrial production over July and August. The modest
> decrease followed a 1 percent rise in industrial production over July and
> August, advances that many manufacturers took as early stages of a
> resurgence in manufacturing growth (Daily Labor Report, page D-11).
>
> An upswing in the number of employees in their prime working years helped
> to boost productivity growth by about a half a percentage point between
> 1991 and 1998, but output per hour and overall growth could ebb after
> 2010, as baby boomers start to retire, the Joint Economic Committee says.
> "In the 1990s, the rapid growth of prime age workers has boosted both
> productivity and its growth," the JEC said in its annual economic report.
> "Approximately half of the U.S. labor force is 35 to 54 years old, up from
> only 36 percent in 1980," and that share will not change much over the
> next 10 years, the JEC said. A recent study released by Macroeconomic
> Advisers LIC in St. Louis concluded that technological advances and
> computer investments had hiked the U.S. productivity growth rate by 2.6
> percent over the last 4 years (Daily Labor Report, page A-4).
>
> The Census Bureau has begun to revise its definition of what constitutes
> poverty in the United States, experimenting with a formula that would drop
> millions more families below the poverty line. The bureau's new approach
> would in effect raise the income threshold for living above poverty to
> $19,500 for a family of four, from the $16,600 now considered sufficient.
> Suddenly, 46 million Americans, or 17 percent of the population, would be
> recognized as officially below the line, not the 12.7 percent announced
> last month, the lowest level in nearly a decade. A strong economy has
> undoubtedly lifted many families but not nearly as many as the official
> statistics suggest. Housing, like health insurance, is a big hurdle. The
> poor are twice as likely as the nonpoor to rent rather than own their
> homes, according to a Labor Department study. The nation's poor are four
> times as likely as the nonpoor to have their utilities cut off, the Labor
> Department also found (Louis Uchitelle, writing in The New York Times,
> page 1).
>
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