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PPI shows tame inflation
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November 14, 1997: 9:13 a.m. ET
Producer Price Index rises 0.1 percent in October, calming inflation fears
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NEW YORK (CNNfn) - Producer prices rose modestly higher in October, the U.S. Labor Department said Friday, providing the latest sign of tame inflation.
The Producer Price Index edged up just 0.1 percent last month, in line with expectations, following a 0.5 percent increase in September.
The bond market rose after the release, with 30-year Treasury bonds gaining 12/32, holding back the yield to 6.06 percent.
The numbers were good news for inflation watchers. "The PPI is just perfect," said Delos Smith, economist at the Conference Board. "This is just what we wanted."
The core rate, which excludes the often volatile food and energy sectors, remained unchanged after increasing 0.4 percent one month ago.
Falling gas prices held back the index of energy goods prices to a 0.1 percent gain. The retreat in gas costs was checked by an increase in prices for residential natural gas and electric power, however.
Food prices increased 0.4 percent in October on the heels of a 0.1 percent gain the month before. Within that figure, prices for fresh and dry vegetables surged ahead 16.8 percent, while egg prices had a downturn of 10 percent.
The rise in the PPI, which represents finished goods, contrasted with a 0.1 percent decrease in the index for intermediate goods, which are goods which need further processing.
The index of crude goods, or unprocessed commodities, advanced 4 percent in October, primarily because of rising energy prices.
So far this year, the PPI has declined 1.2 percent, indicating low inflationary pressures. It is a sharp turnaround from 1996, when the PPI pushed ahead 2.8 percent over the course of the entire year.
-- by staff writer Randy Schultz
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U.S. Labor Department
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