Wednesday, January 18, 2006

 

CPI Report Shows More Deflation

The Labor Department reported lower prices. "U.S. consumer prices unexpectedly fell for a second month in December as energy prices declined, a government report showed. Excluding food and energy, prices rose no faster in 2005 than the year before. The 0.1 percent decline in the consumer price index follows a 0.6 percent decline in November, the first back-to-back declines in two years, the Labor Department said today."

"'Inflation pressures are fairly well-contained,' said Brian Bethune, an economist at a forecasting firm in Lexington, Massachusetts. 'This will reinforce the Fed's view that only a few more rate hikes are indicated for this monetary tightening cycle.'"

"The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Houston-based Continental Airlines Inc. said yesterday it had a fourth-quarter loss because of increased competition from low cost carriers and the inability to raise fares to cover higher fuel costs."

"'We continue to face significant challenges,' CEO Larry Kellner said in a statement. Crude oil 'still hovers at record-high prices.'"

"Wal-Mart Stores Inc.'s strategy of cutting prices hurt the Bentonville, Arkansas-based retailer's December results. The company said earlier this month that the smallest December sales gain in five years may erode fourth-quarter profit. A survey released last week by the National Federation of Independent Business showed fewer small business owners raised prices last month, and a declining number said they plan to charge more in coming months."

"U.S. producer prices excluding fuels and food rose less than forecast in December, a sign companies are having little success so far in passing along higher raw materials costs. Prices of goods imported into the U.S. unexpectedly fell for a second month in December, the first back-to-back decrease since 2004, suggesting overseas competition will limit domestic inflation."

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