CPI, New Jobless Claims, and Inventory Reports Released

Reports on the consumer price index and new claims for unemployment benefits were released today.  The CPI report showed prices increasing by .5% last month, a 6% annual rate.  Core inflation, which excludes energy and prices, increased by .1% or 1.2% annually.  The year-over-year rates are 3.6% overall and 2.1% for core inflation. Jobless claims rose by 71,000 and 68,000 of those were attributed to Katrina.

[Update - adds statements from WSJ]

In a third report on sales and inventories for July, inventories fell 0.5 percent while sales rose 1.1 percent, the most since December.  The fall in inventories signals increased production will be necessary to satisfy demand.  Finally, this report from the NY Fed on conditions in NY Fed region showed more strength than expected.

In evaluating these data note that the effects of Hurricane Katrina are not in most of these data since it didn’t hit until very late in the month.  Thus, inflation readings and jobless claims are both likely to rise further this month.   Given the Fed’s belief that it has very little power to affect employment conditions in the short-run, a task Janet Yellen said must be handled with fiscal policy, and the underlying price pressures due to higher energy costs, I still expect rates to go up t the next meeting.  But it will be interesting to see the extent to which recent events and data alter the accompanying statement.  I expect the data dependent nature of further rate increases to be noted.

[Reports by NY Times, Washington Post (AP), CNN/Money, Bloomberg, LA Times (AP)]

Update:  From the WSJ:

In other economic news released Thursday:

• The Philadelphia Federal Reserve reported little growth in its region in September and broadening price pressures. The bank's index measuring such growth dropped to 2.2 from 17.5 in August and 9.6 in July. Economists had expected a reading of 13 this month. The bank's new-orders and employment indexes turned in their worst performances since April 2003 and September 2003, respectively.

• The New York Federal Reserve reported that its index measuring manufacturing activity in the New York region dropped to 16.97 in September from 23.04 in August. The bank said the data were collected between Sept. 1 and Sept. 14, after Hurricane Katrina hit the Gulf Coast. Economists had expected a reading of 16.8. New orders and unfilled orders declined, while readings on employment, shipments and prices paid increased.

• U.S. business inventories unexpectedly shrank in July as sizzling car sales helped clear out auto showrooms and lots. Inventories dropped 0.5%, the biggest drop in nearly two years, to a seasonally adjusted $1.271 trillion, after remaining flat in June, the Commerce Department said Thursday. It was the largest decrease since stockpiles contracted at the same rate in August 2003. Economists had expected a more modest 0.2% drop. Business sales advanced 1.1% to $1.012 trillion, after a revised 0.8% increase in June. The inventory-to-sales ratio eased to 1.26 from 1.28.