Washington, Jan. 16 (Bloomberg) -- U.S. consumer prices probably rose 0.2 percent in December as Venezuelan strikes and the threat of war with Iraq pushed up oil costs, economists said in advance of today's inflation statistics. An increase in the consumer price index, the most widely followed gauge of consumer inflation, would follow a gain of 0.1 percent in November. Excluding food and energy, the index probably rose 0.1 percent last month, based on the median of 63 economists surveyed by Bloomberg News. ``With the exception of energy prices, consumer inflation has been tame,'' said Steven Wood, principal economist at Insight Economics LLC in Walnut Creek, California. ``The core CPI increased only modestly with weakness in apparel and housing.''
Consumers, whose spending generates two-thirds of the economy, have benefited as retailers slashed prices on cars, clothing and computers to attract holiday shoppers. Still, the price-cutting can hurt company profit and discourage the new investment needed to spur faster economic growth, economists said. The Labor Department will issue the inflation report at 8:30 a.m. Washington time. At the same time, the department will probably report that the number of U.S. workers filing new claims for state jobless benefits increased last week as companies continued to pare payrolls. States probably received 395,000 initial unemployment applications in the week that ended Saturday, up from 389,000 the prior week, according to economists' median forecast. It would be the third week in four for claims to fall below the 400,000 mark that some economists say signals a weak labor market. Also today, the Federal Reserve Bank of Philadelphia will probably report manufacturing in its region expanded for the third consecutive month. The bank's factory index probably registered a reading of 9.0 for January, according to economists' median forecast, slowing from December's revised reading of 11.3. Positive numbers in the survey point to growth.
Energy Prices
The average retail price of gasoline rose 5.3 percent between Dec. 2 and Dec. 30, according to the U.S. Department of Energy. Crude oil prices gained 15 percent in December, and natural gas prices jumped 11 percent. Prices for some other goods including autos fell. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit used incentives to lure vehicle buyers into showrooms as consumer confidence waned and growth slowed late last year. Retailers including Wal-Mart Stores Inc. and Target Corp. reported weaker-than-expected holiday sales. U.S. retail sales rose 1.2 percent in December, less than expected. Excluding auto sales, retail sales were unchanged last month. The weakness of consumer demand and businesses' lack of leverage for raising prices were evident in the producer price index reported yesterday. Prices paid to factories, farmers and other producers were unchanged in December, the Labor Department said. For the year, prices paid to producers for goods minus food and energy fell 0.4 percent, the biggest decrease since the government started keeping records in 1973.
Cost Cutting
With inflation and demand low, companies have little means to boost profits except by cutting costs, including labor. U.S. payrolls unexpectedly fell by 101,000 in December, and the unemployment rate stayed at 6 percent, the Labor Department said. That capped the first back-to-back years of job losses since the late 1950s. The economy probably grew at an annual rate of 1.4 percent in the final three months of last year, according to the Blue Chip Economic Indicators survey of more than 50 economists. That's about half the 10-year average for the U.S. economy. The combination of low inflation and slow economic growth has convinced Federal Reserve policy makers that they have room to leave interest rates low to stimulate the economy. While calling current interest-rate policy ``accommodative'' the Fed's Open Market Committee last month left its benchmark overnight bank lending rate at 1.25 percent, the lowest since July 1961. //www.quote.bloomberg.com/