Consumers strained by rising prices - Yahoo! News
Consumers strained by rising prices - Yahoo! News
Consumers strained by rising prices
By Glenn Somerville
WASHINGTON (Reuters) - Shoppers faced moderate price rises in December but that capped a year in which prices soared at the sharpest rate in 17 years, pressuring households also dealing with a steep housing downturn and tighter credit.
The Labor Department said on Wednesday its Consumer Price Index rose 0.3 percent in December, less than half November’s 0.8 percent jump. For all of 2007, the CPI rose 4.1 percent, well ahead of 2006’s 2.5 percent gain and the steepest since 1990.
The data “underlines our view that we’re on the razor’s edge here, that we could be headed into recession,” said Mike Schenk, senior economist with Credit Union National Association in Madison, Wisconsin.
Separately, the Federal Reserve said that output by the nation’s mines, factories and utilities was flat in December and for the full year 2007 posted its weakest gain since 2003.
Fed policy-makers are widely expected to cut interest rates aggressively by a half percentage point when they meet January 29-30 and the White House, Congress and politicians campaigning for presidential nominations all are urging swift action on a complementary fiscal stimulus plan.
Stock prices were mixed at mid-day. The Dow Jones Industrial Average (.DJI) was slightly ahead, helped by news that banker JP Morgan Chase & Co. (JPM.N) managed to make a profit in the fourth quarter in contrast to some other big banks.
But the Nasdaq composite index was lower with technology shares hurting after a disappointing earnings report from sector bellwether Intel Corp (INTC.O). Intel’s chief financial officer, Stacy Smith, said he was a “little bit cautious” about the economy’s prospects, a comment that fed investor fears about a potential downturn
U.S. Treasury debt prices were mixed as traders apparently took some profits from a recent run-up in prices.
The Consumer Price Index is the most widely watched gauge of inflation. The so-called core CPI, which strips out volatile food and energy items, was up 0.2 percent in December after a 0.3 percent November increase, which some analysts said was a reassuring sign that price pressures might be easing.
“Over the last 12 months, core inflation increased 2.4 percent, still a little too hot for the Fed but below the 2.6 percent year-over-year level we saw in November,” said Bernard Baumohl, managing director of The Economic Outlook Group LLC in Princeton, N.J.
“Given this relatively calm inflation environment, the Fed need not be reluctant to significantly lower short-term interest rates,” he added.
The department said both food and energy costs rose during 2007 at the fastest rates since 1990. Energy costs in the 12 months were up 17.4 percent while food gained 4.9 percent.
In a separate report, the Fed said U.S. industrial production was flat in December, defying expectations for a decline. Manufacturing output was also flat last month following a revised 0.3 percent rise in November.
Despite signs of a slowing economy, foreign investors continued to pour money into U.S. investments. Net overall capital inflows into the United States surged to $149.9 billion in November, from a revised $92.2 billion in October, the Treasury Department said.
November’s inflows were more than sufficient to cover the month’s U.S. trade deficit of $63.1 billion.
Net long-term capital inflows totaled $90.9 billion compared with $114.0 billion in October.
(Additional reporting by Gertrude Chavez-Dreyfuss and Ellen Freilich in New York and Alister Bull in Washington; Editing by Andrea Ricci)