Fed Holds Steady While Economy Slows
Future rate hike unlikely; producer price index reveals increases
By Dr. Constantine G. Soras, Economics Editor
Total non-farm payrolls rose by 252,000 jobs in September after falling by 91,000 in August. After factoring out the return of 75,000 striking workers, and the release of 27,000 temporary Census workers, the September gain was 204,000 — much better than the adjusted 17,000 gain in August. A strong dollar, higher energy costs and weakness in export markets led to a loss of 66,000 factory jobs in September on top of a 117,000 drop in August.
The lower September jobless rate rekindled fears of inflationary pressures, which unsettled the financial markets.
The Producer Price Index for finished goods shot up 0.9 percent in September, due mostly to increases in oil, car and truck prices and the largest gain since February. Excluding food and energy, the price index was up 0.3 percent.
Consumer prices rose 0.5 percent in August largely driven by a 1.6-percent increase in apparel prices and higher tobacco prices, as well as increased energy costs, which rose 3.8 percent after falling 2.9 percent in August. Core inflation was up 0.3 percent after rising by 0.2 percent for five consecutive months.
Index Of Textile Production (1992 = 100)
Factory Output On The Rise
Industrial production rose 0.2 percent in September, following a 0.4-percent gain in August and a 0.2-percent decline in July. Factory output was up 0.3 percent despite a 2.2-percent drop for transportation equipment. Third-quarter industrial output grew 2.8 percent at an annual rate, the slowest gain since the first quarter of 1999 and a sign of slowing economy. The operating rate of industrial capacity held steady at 82.2 percent in September, marginally up from the 1967-1999 average of 82.0 percent.
Housing starts rose 0.3 percent in September to an annual rate of 1.53 million units. Single-family units were down 1.3 percent to 1.25 million. New construction was up 8.1 percent in the Northeast and 8.6 percent in the West, but fell 2.6 percent in Midwest and 4.4 percent in the South.
The U.S. trade deficit of goods and services narrowed in August to $29.44 billion from a record $31.69 billion in July. Exports — led by capital goods, industrial supplies and automotive products — shot up 3.6 percent to $93.02 billion. Imports rose 0.8 percent to $122.46 billion.
Business sales rebounded 0.5 percent in August from 0.6 percent in July, as durable goods shipments rose 0.7 percent and non-durable sales grew 0.4 percent. Meanwhile, business inventories grew 0.7 percent, causing the August inventory-to-sales ratio to edge up to 1.34 from 1.33 in July.
Textile Output, Utilization Rate Improve; Jobless Rate Eases
Results for textiles and apparel were mixed. Payrolls fell 0.2 percent in September after edging up 0.1 percent in August. The volatile jobless rate for textile mill workers eased to 3.1 percent from 3.2 percent in August.
Textile output bounced up 1.4 percent in September after falling 2.9 percent in August. At an annual rate, textile output tumbled 14.3 percent in the third quarter. The utilization rate for textiles improved to 79.9 percent of capacity from 78.9 percent in August.
Textile shipments declined 1.0 percent in August, after falling 0.7 percent in July, while inventories increased 0.4 percent, causing the August inventory-to-sales ratio to move up to 1.63 from 1.60.
Retail sales rose 0.9 percent in September, the largest gain since February. Motor vehicle sales rose 1.4 percent after falling 0.4 percent in August. Sales of furniture and home furnishings rose 0.8 percent and were up 0.2 percent for general merchandise. Sales fell 0.7 percent for building materials and hardware. Apparel and accessory sales were up 0.4 percent.
Producer prices of textiles and apparel edged down 0.1 percent in September. Prices rose 0.2 percent for synthetic fibers and were unchanged for finished fabrics. Prices dropped 1.0 percent for carpets, 0.7 percent for home furnishings, and 0.4 percent for greige fabrics and for processed yarns and threads.