Posted on 11/14/2006 6:51:47 AM PST by Brilliant
WASHINGTON (AP) -- Inflation at the wholesale level plunged at a record pace in October, led by big declines in the price of gasoline and new cars.
Wholesale prices fell 1.6 percent last month, tying the record decline set in October 2001, the Labor Department reported Tuesday. It was the second consecutive big decrease, following a 1.3 percent fall in September.
Both months were heavily influenced by falling energy prices. But underlying inflation pressures were held at bay last month as well. Core inflation, which excludes energy and food, dropped by 0.9 percent, the biggest one-month fall in 13 years. That reflected big declines in prices for new cars and sport utility vehicles as dealers brought back sales incentives.
In other economic news, retail sales dropped by 0.2 percent in October, the second consecutive monthly decline following a 0.8 percent fall in September. Much of the weakness reflected falling gasoline prices, which pushed sales at service stations down by 0.6 percent in October.
Sales at auto dealers rose by 0.6 percent in October after a 0.7 percent September increase. But sales at department stores fell by 0.3 percent while sales at specialty clothing stores managed only a tiny 0.1 percent increase.
The overall economy slowed sharply in the spring and summer as consumers were battered by rising energy prices, higher interest rates and a cooling housing market.
Economists, however, believe that the recent significant declines in energy costs will lift consumer spirits and keep the economy from toppling into a recession.
The big retreat in core inflation was certain to be welcomed at the Federal Reserve, where policymakers are hoping that a string of 17 consecutive rate hikes will slow the economy enough to cause a decline in inflation pressures, which had risen above the Fed's comfort zone.
The central bank has left rates alone since August and analysts believe there will be no change when the Fed meets for the last time this year on Dec. 12.
The big 0.9 percent drop in core inflation was a welcome development following a 0.6 percent spike in September.
The big movements were attributed to car and truck prices, which drove core inflation higher in September and then acted to depress core inflation in October as dealers brought back sales incentives to move a huge backlog of unsold cars. Excluding new car prices, core inflation would have risen by a modest 0.1 percent in October.
Energy prices dropped by 5 percent last month following an even larger 8.4 percent fall in September. Gasoline prices, which had been surging for much of the year, have fallen by about 80 cents since rising above $3 per gallon in early August.
Gasoline prices were down 7.9 percent last month while natural gas, the most popular home heating source, fell by a record 9.3 percent.
Food costs were down 0.8 percent in October as the price of vegetables, pork, chickens and beef all declined.
Outside of food and energy, the 0.9 percent fall in core inflation was heavily influenced by the swing in auto prices. The category that includes sport utility vehicles fell by a record 9.7 percent while the price of passenger cars was down 2.3 percent.
Computer prices fell by 3.1 percent, the biggest drop since June.
The good news on wholesale inflation was expected to be seen in falling consumer prices as well. Analysts were predicting that prices at the retail level should drop by around 0.3 percent. The government will release that report on Thursday.
IBRYMB! Oh wait. . . . Bush's fault!
Don't worry. The Dims will solve this problem.
The Drive-By Media's embargo on good economic news was lifted last Wednesday morning.
Yeah, right! Doncha just love that one of their first policy efforts will be to raise the minimum wage. I know they have 600 economists who state that it will not affect unemployment, but the fact is that it does. When a business person is forced to raise wages, they are usually between a rock and a hard place in terms of cost. Very often it means firing the least experienced, least productive, often minority worker. It is this audience the increase is supposed to help.
If raising the wage to $7.25 is such a great idea, clearly raising it to $20 is even better. If there's no unemployment consequences, why not shoot for this target?
They're idiots...
Since we won't see their sorry butts on this thread, I dedicate this post to their loving memory:
Egads! This means we are officially suffering from deflation! Do you realize this is an annual 19.2% rate?! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling! The sky is falling!
Pelosi, you magnificent b...
Oh, sure, like anyone doesn't used food or energy. This is just the way the government makes things look better than they really are.
Wholesale prices fell 1.6 percent last month, tying the record decline set in October 2001
Wait, they also release numbers that include food and energy? And those numbers are actually better? Never mind.
Yep, the yield curve has been flat or inverted for way too long.
A can of soup is still 99 cents in the store and taxes keep going up and the Dumbocrats WILL NOT make recent Bush initiative tax cuts / repeals permanent.
They already did -- didn't you see it?
Even though the economy grew "real slow" the last 6 months, it's going to go great guns NOW.
Now the truth is that raising the min. wage either has no effect or a devastating effect. If the min. wage is below the prevailing wage, it has no effect. If the government imposes a minimum price on BMW's of $10000, it won't make a difference.
If it is above the prevailing wage, the resulting surplus of labor may be small. I.e., just a few schlubs will be laid off. Might be better in the long run, I prefer the automatic checkout to having to talk to the person manning the cash register.
But the big deal here, that everyone now knows, is the cost of union labor. Union contracts are tied to the minimum wage. An automatic raise without negotiation. Whom will this effect? Mostly, it will effect government. Most union labor is either in government directly or works as government contractors. As far as state governments go, this is roads and bridges.
Watch Ohio. They put in a COLA increase for the minimum wage. Disaster awaits them. First, the Democrats will not be able to run on the minimum wage again. They return to it like a dog to vomit. It's their only populist issue. If they cannot agitate for an increase, they have no sure issue to run on. Furthermore, Democrat governors will be handcuffed. They'll find labor eating more and more of the state budget. The state salaries will go up, costs for projects will go up, everything will go up. Either they will have to raise taxes constantly or they will have to do some union-busting.
It will be a beautiful disaster.
Don't blame mathematicians. Economics is the art of finding the best-fit straight line through a single data point.
"Core" inflation is an attempt to estimate the most consistent invariable trends. Hence, the most volitile prices are left out. Certainly interest rates for home loans would not be set using a "core" rate but the overall rate. Thus, while informative it is not of much practical use.
Wow, look at what the democrats have done in only one week! /s
I know. I was just mocking those Freepers who think that the existence of a "core rate" is a conspiracy to hide inflation.
Pelosi, you magnificent b...
LOL
In best Rosanadanadana voice "Never mind."
You're right, of course, if the new minimum is below the market wage, there won't be an impact. If that's the case, why bother? You're also right about union wages often being tied to the minimum, but I don't think that's as prevalent now as it used to be.
As to Ohio...what is it there with those people? When Celeste was govenor, he passed a bill that required any company that closed their doors to pay an "exit tax" equal to one-half of their annual payroll. (This was when so many companies were fleeing to the south.) Six months later, he was scratching his head saying: "Gee, I wonder why the number of new businesses being formed in Ohio has gone to zero?" Well, duh... At least they were smart enough to strike it from the books.
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