By Timothy R. Homan
Oct. 15 (Bloomberg) -- Prices paid by U.S. consumers probably rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the recession, economists said before reports today.
The cost of living may have risen 0.2 percent after increasing 0.4 percent in August, according to the median of 79 projections in a Bloomberg News survey. Other reports may show manufacturing in the New York and Philadelphia regions continued to expand this month.
The worst economic slump since the 1930s has left unemployment at a 26-year high and record levels of homes sitting vacant, signaling companies and landlords will hold the line on prices in coming months. The lack of inflation may give the upper hand to the Federal Reserve policy makers who’ve said the central bank can keep interest rates low for a long time.
“Inflation will continue to decelerate,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “There is just way too much spare capacity out there. We don’t see any aggressive moves by the Fed until at least the middle of next year.”
The Labor Department’s data on consumer prices are due at 8:30 a.m. in Washington. Economists project the report will show the cost of living is down 1.4 percent over the past 12 months, according to the survey median.
Prices Steady
Excluding food and fuel, prices rose 0.1 percent in September, the same as a month earlier, according to the survey. So-called core costs were probably up 1.4 percent from September 2008, also the same as in August, the survey showed.
Fed Vice Chairman Donald Kohn this week said inflation and growth will probably stay below the central bank’s objectives for some time, warranting low interest rates for an “extended period.” His concerns echoed those of New York Fed President William Dudley.
In contrast, Kansas City Fed President Thomas Hoenig and Fed Governor Kevin Warsh have been among those saying rate increases may happen sooner, or with more force, than some investors anticipate.
The minutes of the policy-making Federal Open Market Committee’s Sept. 22-23 meeting, released yesterday, showed officials weighed the risks that an anemic recovery would lead to “subdued and potentially declining wage and price inflation.”
The worst housing slump since the Great Depression pushed the level of rental vacancies up to 10.6 percent from April through June, the highest level in data going back to 1956, according to figures from the Census Bureau.
Rents Weaken
That means rents, which account for almost 40 percent of core consumer prices, will be restrained in coming months. The category tracking rental values of owner- occupied houses was up 0.1 percent for the three months ended in August, the smallest increase over similar periods since records began in 1982.
The world’s largest economy lost 263,000 jobs last month, bringing the total drop in payrolls since the recession began in December 2007 to 7.2 million, the Labor Department reported last week. The jobless rate climbed to 9.8 percent, the highest level since 1983.
Spartan Stores Inc., which distributes groceries and runs supermarkets, said lower prices are pushing down sales. Dennis Eidson, the Grand Rapids, Michigan-based company’s chief executive officer, said yesterday in a statement that he expects weakness for the remainder of its fiscal year due to “product price deflation” as consumers “behave cautiously given the challenging economic environment.”
Factories Expanding
The Fed Bank of New York’s Empire State manufacturing index, also due at 8:30 a.m., may ease to 17.3 in October from an almost two-year high of 18.9 the prior month, according to the Bloomberg survey median.
A similar report at 10 a.m. from the Philadelphia Fed may show its factory gauge fell to 12 from 14.1, also the highest level since 2007. Positive readings signal expansion.
The Dow Jones Industrial Average yesterday topped 10,000 for the first time in a year, closing up 1.5 percent at 10,015.86, as investors gained confidence the economy was improving. The rally since March has erased about half the damage done since the gauge reached a record two years ago.
A separate report today from the Labor Department at 8:30 a.m. may show the number of Americans filing claims for unemployment benefits slid last week to the lowest level since January, according to economists surveyed.
Bloomberg Survey
===============================================================
CPI Initial Empire Philly
Claims Manu. Fed
MOM% ,000’s Index Index
===============================================================
Date of Release 10/15 10/15 10/15 10/15
Observation Period Sept. 10-Oct Oct. Oct.
---------------------------------------------------------------
Median 0.2% 520 17.3 12.0
Average 0.2% 522 17.2 12.5
High Forecast 0.5% 550 22.1 17.0
Low Forecast -0.2% 490 12.0 8.0
Number of Participants 79 41 50 55
Previous 0.4% 521 18.9 14.1
---------------------------------------------------------------
4CAST Ltd. 0.3% 520 15.0 10.0
Action Economics 0.2% 525 18.0 13.0
AIG Investments 0.1% --- 15.0 15.0
Ameriprise Financial Inc 0.2% 515 16.0 12.0
Argus Research Corp. 0.3% --- 12.0 12.0
Banesto --- 520 18.4 12.1
Bank of Tokyo- Mitsubishi 0.2% 528 22.1 11.2
Bantleon Bank AG 0.1% --- 19.0 13.0
Barclays Capital 0.1% 530 --- 11.0
Bayerische Landesbank 0.2% --- 18.0 11.0
BBVA 0.3% --- --- ---
BMO Capital Markets 0.0% 510 17.0 13.0
BNP Paribas 0.0% 511 17.0 13.0
BofA Merrill Lynch Resear 0.1% --- 21.0 12.5
Briefing.com 0.1% 540 13.5 ---
Calyon 0.1% --- 18.0 11.0
Capital Economics 0.2% --- 20.0 15.0
CIBC World Markets 0.1% --- --- ---
Citi 0.2% 525 18.0 12.0
Commerzbank AG 0.2% 520 15.0 10.0
Credit Suisse 0.1% 500 --- ---
Daiwa Securities America 0.3% --- --- ---
Danske Bank 0.1% --- --- 17.0
DekaBank 0.2% --- 12.0 10.0
Desjardins Group -0.1% 530 14.5 10.0
Deutsche Bank Securities 0.2% --- 19.0 15.0
Deutsche Postbank AG 0.0% --- --- ---
DZ Bank 0.2% --- 17.0 12.0
First Trust Advisors 0.2% 523 18.9 10.3
Fortis 0.1% --- 18.5 10.0
FTN Financial 0.1% --- --- 10.0
Goldman, Sachs & Co. 0.1% --- --- ---
Helaba 0.1% 530 19.0 17.0
Herrmann Forecasting 0.1% 527 14.7 15.6
High Frequency Economics 0.2% --- --- 10.0
HSBC Markets 0.1% 530 17.0 12.0
Ibersecurities 0.3% --- 17.0 ---
IDEAglobal 0.2% 525 20.0 16.0
IHS Global Insight 0.2% --- --- ---
Informa Global Markets 0.1% 527 16.5 10.0
ING Financial Markets 0.2% 535 17.5 11.0
Insight Economics 0.1% 530 17.5 12.5
Intesa-SanPaulo 0.2% --- 17.0 12.0
J.P. Morgan Chase 0.1% 515 20.0 15.0
Janney Montgomery Scott L -0.2% --- --- ---
Jefferies & Co. 0.3% --- 17.5 13.1
Landesbank Berlin -0.2% 540 --- 8.0
Landesbank BW 0.0% --- 16.0 12.0
Maria Fiorini Ramirez Inc 0.1% 525 --- ---
MFC Global Investment Man 0.2% 517 --- ---
Mizuho Securities 0.2% 550 15.0 11.0
Moody’s Economy.com 0.2% 515 16.9 11.8
Morgan Keegan & Co. 0.3% --- --- ---
Morgan Stanley & Co. 0.1% --- --- ---
National Bank Financial 0.2% --- --- ---
Natixis 0.2% --- --- ---
Newedge 0.3% --- 20.0 16.0
Nomura Securities Intl. 0.1% --- 15.0 11.0
Nord/LB 0.0% 525 15.0 10.0
PNC Bank 0.1% --- --- ---
Raymond James 0.2% 490 --- ---
RBC Capital Markets 0.2% 509 18.0 15.0
RBS Securities Inc. 0.2% 505 --- ---
Ried, Thunberg & Co. 0.1% 520 19.0 15.0
Schneider Foreign Exchang 0.3% 527 --- ---
Scotia Capital 0.0% 520 --- 13.0
Societe Generale 0.3% --- 18.0 14.0
Standard Chartered 0.2% --- --- ---
Stone & McCarthy Research 0.2% 520 14.9 10.0
TD Securities 0.1% 510 20.0 15.0
Thomson Reuters/IFR 0.1% 520 16.0 10.0
UBS 0.1% 520 19.0 14.0
UniCredit Research 0.2% --- --- ---
Union Investment 0.2% --- --- ---
University of Maryland 0.3% 520 --- ---
Wells Fargo & Co. 0.0% --- --- ---
WestLB AG 0.2% --- 16.5 12.0
Westpac Banking Co. 0.1% 530 17.0 12.0
Woodley Park Research 0.5% --- --- 15.0
Wrightson Associates 0.1% 520 19.0 15.0
===============================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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