By Shobhana Chandra
Jan. 15 (Bloomberg) -- Prices paid to U.S. producers probably fell in December for a fifth month as demand for raw materials collapsed with the deepening recession, economists said before a report today.
The estimated 2 percent drop, according to the median estimate of 77 economists in a Bloomberg News survey, would cap the longest slide since 1998. Other reports may show the factory slump persisted at the start of 2009.
The global slowdown has caused sales at companies such as Alcoa Inc. to plummet, leading to cutbacks in output and hiring that are reverberating through the economy. Falling commodity costs and asset values are raising concern among Federal Reserve policy makers that the U.S. may tip into a deflationary spiral of deep and extended price decreases that are difficult to stop.
“The weakness in the economy is removing pricing power,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We don’t see deflation occurring, but the risk is there.”
The Labor Department’s report on wholesale prices is due at 8:30 a.m. in Washington. Forecasts ranged from declines of 0.8 percent to 2.9 percent. Prices excluding food and energy probably rose 0.1 percent for a second month, the survey showed.
Also at 8:30 a.m., the Fed Bank of New York may report its general economic index was little changed at minus 25 this month after December’s reading of minus 25.8 that was the lowest since records began in 2001, according to the survey median.
The Philadelphia Fed’s manufacturing index, due at 10 a.m., is projected at minus 35 in January. Readings less than zero signal manufacturing is contracting.
Job Market
Another report at 8:30 a.m. from Labor may show more Americans filed first-time claims for jobless benefits last week.
President-elect Barack Obama is pressing for quick passage of a stimulus plan of about $775 billion that would cut taxes, boost infrastructure spending, and create jobs.
The economy deteriorated across almost all areas of the country in the past month, hurt by a drop in retail sales and a lack of credit, the Fed said yesterday in its regional business survey. Retailers engaged in “deep discounting” during the holidays, with “sizable” price cuts, while wage pressures were “largely contained,” the Fed report found.
Some policy makers discussed setting an explicit target for inflation to discourage expectations that price increases will slow “below desired levels,” according to minutes of their December meeting issued last week.
Crude Oil
Crude oil futures have fallen about three-fourths from the July peak of $147.29 a barrel on the New York Mercantile Exchange. Aluminum prices are at five-year lows as automakers, builders and appliance manufacturers cut orders.
Alcoa, the largest U.S. aluminum producer, this month reported its first quarterly net loss in six years and said it will further cut output in 2009 if demand continues to weaken.
“The aluminum industry is caught up in a perfect storm of historic proportion,” Chief Executive Officer Klaus Kleinfeld said on a conference call with analysts on Jan. 13. “Inventories are building and prices are decreasing.”
Producer prices are one of three inflation gauges reported by the Labor Department. Prices of goods imported into the U.S. fell for a fifth consecutive month in December, figures showed yesterday.
A report tomorrow may show consumers’ cost of living decreased 0.9 percent in December after a 1.7 percent drop the previous month that was the biggest since records began in 1947, according to the Bloomberg survey.
Bloomberg Survey
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PPI Core Empire Philly
PPI Manu. Fed
MOM% MOM% Index Index
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Date of Release 01/15 01/15 01/15 01/15
Observation Period Dec. Dec. Jan. Jan.
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Median -2.0% 0.1% -25.0 -35.0
Average -1.9% 0.0% -24.7 -34.9
High Forecast -0.8% 0.2% -18.0 -28.0
Low Forecast -2.9% -0.3% -28.0 -41.3
Number of Participants 77 75 49 53
Previous -2.2% 0.1% -25.8 -36.1
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4CAST Ltd. -2.2% 0.1% -27.5 -38.0
Action Economics -2.0% 0.1% -25.0 -36.0
AIG Investments -1.7% 0.1% -23.0 -28.0
Aletti Gestielle SGR -2.0% 0.1% -22.0 -32.0
Ameriprise Financial Inc -1.5% 0.0% -22.0 -30.0
Argus Research Corp. -0.9% 0.1% -25.0 -35.0
Banc of America Securitie -1.8% 0.1% --- ---
Bank of Tokyo- Mitsubishi -2.3% 0.0% -22.5 -38.5
Bantleon Bank AG -2.1% --- -23.0 -34.0
Barclays Capital -2.0% 0.1% -26.0 -38.0
BMO Capital Markets -2.0% -0.3% -26.0 -35.0
BNP Paribas -2.3% 0.0% --- -35.0
Briefing.com -1.7% 0.1% --- -35.0
Calyon -2.0% 0.1% -26.0 -34.0
CIBC World Markets -2.0% 0.1% --- ---
Citi -2.2% 0.1% --- -36.0
ClearView Economics -2.0% -0.1% --- ---
Commerzbank AG -1.5% 0.1% -24.0 -35.0
Credit Suisse -2.3% -0.1% --- ---
Daiwa Securities America -0.8% 0.0% --- ---
Danske Bank -1.5% 0.1% --- -34.0
DekaBank -2.0% 0.1% -23.0 -32.0
Desjardins Group -1.7% 0.1% -22.0 -30.0
Deutsche Bank Securities -2.0% 0.0% -26.0 -34.0
Deutsche Postbank AG -1.8% 0.0% --- ---
Dresdner Kleinwort -1.7% 0.1% -25.0 -37.5
DZ Bank -2.0% 0.1% -27.0 -40.0
First Trust Advisors -2.9% 0.1% -20.0 -41.3
Fortis -1.5% 0.2% -25.5 -33.0
FTN Financial -1.5% 0.0% --- ---
Goldman, Sachs & Co. -1.8% 0.1% --- ---
Helaba -2.0% 0.0% -25.0 -35.0
Herrmann Forecasting -2.3% 0.1% -24.3 -35.0
High Frequency Economics -2.5% 0.1% -25.8 -36.1
Horizon Investments -1.8% 0.0% -26.0 ---
HSBC Markets -2.5% 0.0% -23.0 -35.0
IDEAglobal -2.0% 0.1% -25.0 -35.0
IHS Global Insight -2.5% 0.0% --- ---
Informa Global Markets -1.7% 0.1% -27.0 -36.5
ING Financial Markets -2.2% 0.1% -26.0 -36.0
Insight Economics -2.0% -0.1% -28.0 -38.0
Intesa-SanPaulo -2.0% 0.1% -27.0 -38.0
J.P. Morgan Chase -2.4% 0.1% -26.0 -38.0
Janney Montgomery Scott L -2.2% 0.0% --- ---
Landesbank Berlin -0.9% -0.2% --- -38.0
Landesbank BW -2.0% --- -25.0 -32.0
Lloyds TSB -2.0% 0.0% -25.0 -35.0
Maria Fiorini Ramirez Inc -2.3% 0.1% --- ---
Merrill Lynch -2.8% 0.1% -24.0 -40.0
MFC Global Investment Man -2.0% -0.2% --- ---
Mizuho Securities -1.8% 0.0% -24.0 -30.0
Moody’s Economy.com -1.7% 0.1% -25.0 -36.0
Morgan Keegan & Co. -1.9% 0.0% --- ---
Morgan Stanley & Co. -2.8% 0.0% --- ---
National City Bank -1.3% 0.0% -26.2 -37.4
Natixis -2.1% 0.0% --- ---
Newedge -1.8% 0.1% -24.0 -35.0
Nomura Securities Intl. -1.6% 0.0% -24.0 -30.0
Nord/LB -1.8% 0.2% -27.5 -30.0
PNC Bank -2.0% 0.1% --- ---
Raymond James -1.4% 0.0% --- ---
RBS Greenwich Capital -2.1% 0.1% --- ---
Ried, Thunberg & Co. -2.3% 0.1% --- ---
Schneider Foreign Exchang -2.0% -0.2% -18.0 -29.0
Scotia Capital -1.7% 0.0% --- ---
Societe Generale -1.6% 0.1% -20.0 -34.0
Standard Chartered -2.0% 0.0% -27.0 -37.0
Stone & McCarthy Research -2.2% 0.0% -25.7 -33.4
TD Securities -2.0% 0.2% -25.0 -35.0
Thomson Financial/IFR -0.8% 0.1% -24.0 -30.0
UBS Securities LLC -2.0% 0.0% -28.0 -36.0
University of Maryland -2.4% 0.1% --- ---
Wachovia Corp. -1.5% 0.1% --- ---
Wells Fargo & Co. -2.0% 0.1% -25.0 -36.0
WestLB AG -2.0% 0.1% -24.0 -35.0
Westpac Banking Co. -2.0% 0.1% --- ---
Wrightson Associates -2.3% 0.1% -27.0 -38.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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