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		Home Page News You Can Use Index of US economy shows hardy recovery-report Fri February 20, 2004 10:28 AM ET NEW YORK, Feb 20 (Reuters) - A leading index of the U.S. economy ticked up in the latest week, helped by broadly positive signs showing resilience in the recovery, a report showed on Friday. "The index remains in a solid up trend," said ECRI director of research Anirvan Banerji. "The bottom line this shows is the economy is resilient." The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index (WLI) rose to 132.9 in the week ended Feb. 13, up from the preceding week's downwardly revised reading of 131.6. All of the index's components registered gains except for the measure of the credit health of U.S. companies, which was down a bit from last week's three-year high. The annualized growth rate, a four-week moving average that evens out weekly fluctuations, slipped to 10.5 percent from 11.0 percent.   Consumer Prices in U.S. Rise 0.5 Percent; Core Index Gains 0.2 Percent Feb. 20 (Bloomberg) -- U.S. consumer prices rose 0.5 percent in January, reflecting the largest energy-cost jump since the Iraq War started. Prices excluding food and energy gained 0.2 percent, suggesting inflation remains subdued. The increase in the price index last month followed a rise of 0.2 percent in December, the Labor Department said in Washington. The so-called core index, excluding volatile food and energy prices, climbed 0.1 percent the month before. Energy prices last month surged as winter weather spurred demand and supplies dwindled. The core index gained 1.1 percent in 2003, the smallest annual increase in 43 years, as unused capacity, productivity gains and competition held down prices and spurred discounting by companies including automaker General Motors Corp. and retailer Sears, Roebuck & Co. ``Inflation still looks very low, and it's likely to remain low'' for some time, said Kevin Logan, senior economist at Dresdner, Kleinwort, Wasserstein in New York. ``Most of the rise was energy, and that's not likely to be repeated.'' A drop in demand for Treasuries pushed yields higher as some investors interpreted the report as a sign the Federal Reserve may start considering raising its target rate for overnight loans between banks for the first time since 2000. Inflation erodes the value of a bond's fixed-income payment over time. The benchmark 10-year Treasury due in February 2014 fell 7/32 point, raising the yield 3 basis points, or 0.3 percent, to 4.06 percent at 9:44 p.m. in New York. Federal Reserve Slowing rates of productivity gains combined with strong economic growth should help lower the U.S. unemployment rate this year, William Poole, president of the Federal Reserve Bank of St. Louis, said in a speech today. The Fed is mandated to encourage maximum employment along with stable prices. Increases in payroll employment should be ``substantially stronger'' than the average gains of 75,000 over the past five months, Poole said. Low inflation allows the Fed to be ``patient in removing its policy accommodation,'' he said, adopting the phrase from the Federal Open Market Committee's last statement. The FOMC in June cut its target rate to 1 percent, the lowest since 1958. Poole is among the regional Fed bank presidents who will vote on interest rate policies this year. The consumer price index is the government's broadest gauge of costs of goods and services. Almost 60 percent of the index covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Economists had projected a 0.3 percent increase in the consumer price index after a previously reported rise of 0.2 percent for December, based on the median of 67 forecasts in a Bloomberg News survey. Estimates ranged from a rise of 0.1 percent to one of 0.4 percent. Core prices were forecast to rise 0.1 percent. Energy Costs Surge Consumer prices for all goods and services climbed 1.9 percent for the 12 months that ended last month, the same as for the year through December. Energy prices jumped 4.7 percent in January after gaining 0.3 percent a month earlier. Last month's gain was the largest since 5.4 percent in March 2003, when the war in Iraq started. Gasoline prices increased 8.1 percent, the most since 8.8 percent last February. Electricity costs rose 0.6 percent and natural gas climbed 3.8 percent. Crude oil futures on the New York Mercantile Exchange rose to a 10-month high of $36.20 a barrel Jan. 20. An explosion at a liquefied natural gas plant halted oil and petroleum product shipments from the second largest Algerian export terminal. U.S. crude-oil supplies were at a 28-year low last month. Gasoline costs rose to $1.61 a gallon on average last month from $1.52 in December, according to Energy Department statistics. Auto, Apparel Prices Prices fell for a third straight month for new vehicles and apparel, today's report showed. Consumers paid 0.1 percent less for autos last month, following similar declines in November and December. Costs for clothing dropped 0.3 percent for a second month in a row after decreasing 0.5 percent in November. For the 12 months through January, apparel prices were 1.9 percent lower than a year earlier. Food prices, which account for about a fifth of the index, were unchanged in January after rising 0.5 percent the month before. The cost of meals consumed at home declined 0.3 percent, the most since a similar drop in June 2002. Beef and veal prices fell 1.8 percent, the biggest decrease since 1.9 percent in May 1996. Fresh vegetables and dairy products also registered lower costs while pork and poultry prices rose. Medical Care, Airfares The cost of medical care increased 0.2 percent last month after climbing 0.5 percent in December. Housing costs, which include some energy costs and account for one-third of the index, jumped 0.4 percent after rising 0.2 percent. Airfares gained 0.8 percent last month. Workers' weekly earnings adjusted for inflation climbed 0.2 percent last month after dropping 1 percent in December, the Labor Department said in a separate report. Unused production capacity has helped limit price increases. The proportion of factories, mines and utilities in use reached a two-decade low of 74 percent in June and averaged 74.8 percent last year before edging up to 76.2 percent in January. During the expansion from 1991 to 2001, capacity use averaged 82.2 percent. General Motors, the world's largest automaker, increased incentives 2.4 percent from December to an average last month of $4,431 a vehicle, the most of any automaker, according to CNW Marketing Research Inc. ``What a great time to buy a car or truck,'' said J.T. Battenberg, chief executive officer of Troy, Michigan-based Delphi Corp., the world's largest auto parts maker, in an interview yesterday in Boca Raton, Florida. ``Prices are as low as they've ever been on a percentage of take-home pay. Consumers are in the driver's seat.'' Retail Discounting Clearance sales helped spur demand at retailers including Columbus, Ohio-based Limited Brands and Hoffman Estates, Illinois- based Sears last month. Kohl's Department Stores Inc., which has offered discounts as high as 80 percent, said sales increased 0.3 percent, the first gain in four months. U.S. prescription-drug spending rose 12 percent last year, led by sales of Pfizer Inc.'s Lipitor and Merck & Co.'s Zocor cholesterol-lowering medications, according to a study from IMS Health Inc., which tracks prescription trends. Hughes Electronics Corp.'s DirecTV raised prices by about 4 percent during the fourth quarter, Hughes Chief Executive Chase Carey said on conference call last week. The company expects to boost revenue per subscriber by more than 4 percent this year, he said.   Back to Original Article: News You Can Use   Continue with: Energy costs drive up U.S. Jan consumer prices U.S. Treasuries, Friday, Feb 20 China's Jan crude oil imports hit record Dollar Surges Vs Yen on Security Alert Treasuries Sag as Dollar Climbs on Japan Foreign central banks crowd out US bond investors Consumer Prices Rise 0.5 Percent in Jan. Private Bush Meeting Gets Blogged Average Mortgage Rates Fall Japanese Govt. 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