> BUREAU OF LABOR STATISTICS, DAILY REPORT, TUESDAY, NOVEMBER 13, 2001: > > In the largest one-month drop since the index was begun in 1947, the > producer price index -- prices producers paid for finished goods -- dipped > 1.6 percent, the Bureau of Labor Statistics reports. A decrease in prices > for energy goods, passenger cars, light trucks, and consumer foods led the > decline in the finished goods index in October, bringing the producer > price index down to 139.6. According to the latest BLS figures, the > so-called core rate of wholesale inflation -- finished goods minus food > and energy -- decreased 0.5 percent. The core PPI would have remained > unchanged in October, had it not been for the price decline in passenger > cars and light trucks. "The worsening downturn in industrial activity has > spilled over into a general recession that is driving down prices," said > Jerry Jasinowski, president of the National Association of Manufacturers. > "Falling demand led energy prices down precipitously" (Daily Labor Report, > page D-1). > > The weak global economy is bringing down the U.S. inflation rate, writes > John M. Berry in The Washington Post (November 10, page E1). Producer > prices for finished goods fell 1.6 percent last month, the largest monthly > decline since the index was established in 1947, as gasoline and new-car > prices tumbled, the Labor Department said. In a separate report, the > department also said prices of imported goods fell 0.7 percent last month. > Part of that decline was due to a large drop in world oil prices, but > prices of nonpetroleum goods including raw commodities and intermediate or > finished goods, were also down, by 0.4 percent last month and 3.1 percent > over the past 12 months. > > Wholesale prices posted their biggest decline on record last month as > energy costs fell by the largest amount since 1989 and automakers turned > to cut-rate financing to lure buyers, a government report shows. The > October decline in the Producer Price Index was about four times what had > been forecast and it more than reversed back-to-back gains of 0.4 percent > registered in August and September (Reuters, The New York Times, November > 10, page C14). > > Falling wholesale prices for gasoline, automobiles and other products have > left some economists beginning to wonder whether the U.S. is heading for a > bout of deflation. The producer price index figures last week "...reflect > a very weak industrial sector," said Peter Hooper, chief U.S. economist > for Deutsche Bank AG (The Wall Street Journal, November 12, page A2. The > Journal's page 1 graph, November 13, is of the Producer Price Index 1995 > to the present). > > "Friday's producer price index report for October was the latest warning > sign that deflationary pressures are rising," says Greg Ip, in The Wall > Street Journal's page 1 feature "The Outlook" (November 12). "For > households, across-the-board deflation isn't here yet. In the year > through September -- the most recent data available -- consumer prices > were up 2.6 percent, an inflation rate in line with what had prevailed for > the previous 6 years. But analysts expect that rate to head lower as > well, starting with the October report coming out Friday. Consumers can > see the handwriting on the wall. They expect an inflation rate in the > next 12 months of just 0.4 percent, according to the University of > Michigan's preliminary November consumer sentiment survey. The odds of > broad deflation in the immediate future seem low. Prices for cars and > energy are unlikely to continue declining at their current rate. > > The interior South -- Alabama, Arkansas, Kentucky, Louisiana, Mississippi > and Tennessee -- has suffered more economic problems than other regions as > its recent manufacturing decline has accelerated. With great fanfare, much > of the Southeastern United States diversified its economic base over the > last 2 decades, luring giant auto companies, sprouting new technology > centers, and raising hopes that the region would not just enjoy greater > prosperity but also weather hard times better in the future than in the > past. Instead, the opposite has happened. "The rural South is to this > recession as Detroit was to the 1980's recession," said Mark Zandi, the > chief economist at Economy.com. a West Chester, Pa. consulting firm that > closely follows regional trends. Through early September, the six-state > region had lost 36,000 jobs this year -- more than twice as many, per > capita, as the rest of the country (David Leonhardt, The New York Times, > page C1). > > Former Secretary of Labor Robert B. Reich writes in the op.ed. page of The > New York Times (November 12, page A23) that the economic fallout from > terrorism is hitting some Americans much harder than others, and we need > to respond. Last year, when the slowdown began, layoffs and pay cuts hit > hardest at manufacturing workers, white-collar managers and professionals. > But since the terrorist attacks, consumers had cut their spending and now > a different group is experiencing the heaviest job losses, the mostly > low-paid workers in America's vast personal service sector. In October > 439,000 private-sector jobs were lost -- the largest monthly decline in > more than a quarter-century. Hotels alone lost 46,000, retailers, 81,000, > airlines, 42,000. Minority workers, with a disproportionate share of > low-wage service jobs, have been especially hard hit. Meanwhile, federal > programs for job training and low-interest housing have been shrunk by > budget cuts. State and local governments are in no position to step in. > They are already strapped by rapidly declining tax revenues. > > Another holiday season is approaching and families across the country are > again confronting the question of how to handle the inevitable expenses > and pressures that gift giving, parties, travel, and other pleasures > generate. Some experts are indeed pessimistic, but a recent poll sponsored > by the Consumer Federation of America and the Credit Union National > Association suggest that the holidays won't be that bad (The Washington > Post, November 11, page H2). > > Economic growth will be positive in the first quarter of next year, but > the recovery will be "sluggish," producing growth for the entire year of > around 1 percent, Gail Fosler, chief economist of the New York-based > Conference Board says. She expects real gross domestic product to > contract 1.5 percent in the final quarter of this year, but be a positive > 1 percent in the first quarter. The University of Michigan consumer > sentiment index November 9 showed an improvement for the month of > November, rising to 83.5 from 82.7 in October, which economists said was > better than expected (Daily Labor Report, page A-10). > > DUE OUT TOMORROW: Occupational Employment and Wages, 2000 >
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