August PPI decline seen helping Fed keep interest rates low

Joseph Lazzaro — Fri, 12 Sep 2008 11:00:00 EST

Filed under: Forecasts, Good news, Economic Data, Commodities, Oil, Federal Reserve

U.S. investors and consumers haven't received much good news lately, which is why Friday's producer price index report was a welcome sight.

U.S. producer prices fell a seasonally-adjusted 0.9% in August, the U.S Labor Department announced Friday, as lower energy prices provided some hope that inflation at the wholesale level will moderate in the months ahead.

Economists surveyed by Bloomberg News had expected the August PPI index to fall 0.5%. Producer prices increased 1.2% in July, 1.8% in June, 1.4% in May, and 0.3% in April.

Meanwhile, the core rate, which excludes food and energy costs, increased 0.2%, the Labor Department said, in-line with the Bloomberg News 0.2% consensus estimate.

Economist Peter Dawson told BloggingStocks Friday the August PPI is a pleasant sight for a U.S. market and an economy that's grappling with a series of financial and economic hurdles.

"The report shows a pull-back in energy prices, which is welcome, as it's been the primary culprit in both wholesale and retail inflation," Dawson said. "If wholesale prices continue to trend lower, that will ease pressure businesses face to raise prices to keep pace with costs. Lower oil and gasoline prices will also provide a modest amount of stimulus to the U.S. economy, as it will increase consumer disposable income."

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China's trade surplus narrows in December

Eliza Popescu — Fri, 11 Jan 2008 11:17:00 EST

Filed under: International Markets, Forecasts, Bad News, China, Morgan Stanley (MS), Economic Data

According to the Chinese customs bureau, China's December trade surplus narrowed in December. With the country's trade surplus shrinking, and its money supply narrowing, we may finally be seeing signs that the country's massive economic growth may be coming to an end.

The Beijing central bank reported the November trade surplus fell to $22.7 billion from $26.2 billion. M2, which is the broadest measure of money supply, gained 16.7% to 40.3 trillion yuan ($5.55 trillion) from a year earlier. It was the smallest rise in seven months.

China is beginning to feel the effects of recent yuan gains, weaker global expansion and cuts to export-tax incentives. As a result, its exports rose by the slowest pace in two years. As we discussed, China still plans to strengthen credit controls to avoid financial problems and a possible inflation surge. Wang Tao, an economist at Bank of America Corp. in Beijing, said that "China needs to tighten monetary policy further, given that new loan growth may rebound' as recent signs shows that the country's "economic expansion may have peaked last year."

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