Producer Prices, Spending on the Rise

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Nov. 16, 2005--Despite cheaper gas at the pump, home heating costs kept producer prices rising in October, the Labor Department reported Tuesday.

Yet, higher prices didn't keep consumers, or small-business owners, from spending. A Commerce Department survey, also released Tuesday, showed retail sales gaining 0.9% over September, not counting slumping sales at car dealerships. At the same time, though higher costs forced them to raise their own prices, small businesses continued to buy new equipment -- from vehicles to office furniture -- according to a recent survey by the National Federation of Independent Business.

The nation's farms, factories, and refineries saw prices rise 0.7% in October, following a 1.9% jump in September, Labor Department figures showed. Wall Street analysts had expected prices to flatten out as soaring energy costs and the initial impact of hurricanes Katrina and Rita begin to fade.

While gasoline prices have dropped by 3.3%, surging residential natural gas prices (up 12.7%) and home heating oil (up 12.3%) kept overall energy costs climbing by 4.1%, the Labor Department said.

Excluding food and energy, however, core producer prices actually dropped by 0.3% last month, with manufacturers paying less for early-stage materials such as steel scrap, iron, and aluminum.

Also down were prices for capital equipment, such as light trucks, passenger cars, and agricultural machinery, though prices edged up for heavy industrial material handling equipment, construction machinery, and communications equipment, the department said.

Still, early signs of inflation didn't put a dent in retail sales, according to the Commerce Department. Despite a 3.6% drop in auto sales last month, overall retail sales fell just 0.1% last month to $351.6 billion -- a 5.7% increase over the same period last year. Excluding cars, retailers nationwide reported gains of 0.9%, the department said.

After weak returns earlier this fall, clothing stores rebounded in October by a 3.1% gain over the previous month. Also up were sales of furniture, home appliances, electronics, building materials, and food and beverages, among other sectors. Restaurants and bars alone saw gains of 0.9% over September, the department reported.

Last updated: Nov 16, 2005




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