U.S. consumer prices probably rose 0.1 percent in August, suggesting higher costs for energy and raw materials aren't being passed through to other goods and services, according to a survey of economists ahead of a government report. The projected gain in the Labor Department's consumer price index compares with July's 0.1 percent decline and is based on the median estimate of 71 economists in a Bloomberg News survey. Excluding food and energy, prices probably rose 0.2 percent.
Heightened competition and spare production capacity in many industries mean companies are reluctant to raise prices for fear of losing sales. Federal Reserve Chairman Alan Greenspan said in congressional testimony last week that inflation expectations have eased even as oil prices rose, suggesting the Fed may keep raising its benchmark interest rate at what it calls a ``measured'' pace. ``The inflation anxieties that gripped markets earlier this year have abated because price data have stabilized,'' said Robert DiClemente, chief U.S. economist at Citigroup Global Markets Inc. The report is to be issued at 8:30 a.m. in Washington. Forecasts ranged from a decline of 0.1 percent to a 0.6 percent rise. The consumer price index is the government's broadest measure of the costs of goods and services. Almost 60 percent of the index covers prices paid for services. Consumer prices excluding food and energy were probably 1.8 percent higher in August than the same month last year, matching July's year-over-year increase.
Jobless Claims, Philly Fed
The Labor Department at the same time is expected to report that first-time claims for jobless benefits rebounded to 340,000 last week from 319,000 a week earlier, according to the median estimate of economists surveyed. The jump mainly reflects jobs lost as a consequence of Hurricane Frances in Florida. Preparations for the storm had also prevented some people from filing the week prior, helping propel claims to a two-month low. At noon, the Fed Bank of Philadelphia is expected to report that manufacturing in the region expanded this month at a slower pace than in August, according to the median estimate of economists. The bank's index covering eastern Pennsylvania, southern New Jersey and Delaware is projected to fall to 25 from 28.5 in August. A positive reading signals activity is expanding.
Retail gasoline prices averaged $1.92 a gallon in August, down slightly from an average of $1.95 a gallon the prior month and as high as $2.10 in May, according to U.S. Department of Energy figures. The decline came even as crude oil futures prices on the New York Mercantile Exchange reached a record high last month amid concern about supply disruptions. Concerns over terrorism may have made it difficult for airlines and hotels to pass on prices increases, said Joseph Abate, a senior economist at Lehman Brothers Inc. in New York.
Incentives
Car prices may also have slipped as manufacturers sweetened incentives to boost sales. Automakers increased the amount they spent on incentives last month to $4,203 per unit from $4,027 in July, according to CNW Market Research. Incentives rose 5 percent at General Motors Corp. to $4,869. General Motors Chief Executive Rick Wagoner told reporters Tuesday that carmakers are holding down prices by cutting costs. He said he expects U.S. industry sales to rise about 2 percent to 3 percent this year and next, helped by economic growth. Prices on tobacco, education and medical care may have increased last month, said Bill Sharp, a senior economist at JP Morgan Securities Inc. in New York.
Some companies are betting customers will be willing to pay more as the economy improves. Anheuser-Busch Cos., the world's largest brewer, plans to raise beer prices in the fourth quarter. Federated Department Stores Inc. Chief Executive Terry Lundgren said this week he's ``optimistic'' about the fourth- quarter holiday season as shoppers buy dressier clothes and higher-price merchandise.
Greenspan
Greenspan said in prepared testimony to the House Budget Committee on Sept. 8 that ``inflation and inflation expectations have eased in recent months.'' ``Despite expectations being lower for both growth and inflation, the Fed shows no sign of deviating from its plan to raise interest rates slowly but steadily,'' said Douglas Lee, president of Economics From Washington, a research firm in Potomac, Maryland. The Fed is forecast to raise the benchmark overnight bank lending rate by a quarter-point on Sept. 21 to 1.75 percent, the third increase since June, based on a Bloomberg survey of economists. Rising energy costs have led some economists to cut forecasts for economic growth. The economy will grow at a 3.7 percent annual rate from July through September, slower than the 3.9 percent estimated last month, according to the median of 61 forecasts in a Bloomberg survey conducted Aug. 30 to Sept. 8. Economists have cut a half percentage point from third-quarter forecasts over the past two months. ///www.bloomberg.com