Producer Prices Rise, Jobless Claims Fall

By John S. McClenahen Led by higher prices for food and fuel, the U.S. Labor Department's Producer Price Index (PPI) for finished goods rose 0.8% in May, the biggest monthly increase this year and a larger increase than most economists expected. The so-called core PPI, which doesn't count price changes for food and fuel, rose 0.3% in May, also higher than expected. At the very least, the PPI numbers, released June 17, reinforce expectations that Chairman Alan Greenspan and his 11 voting colleagues on the Federal Open Market Committee (FOMC) will raise the federal funds target rate by 25 basis points to 1.25% when they meet at month's end. Whether the PPI numbers are high enough to help convince the FOMC to raise the federal funds rate higher -- to 1.5%, for example -- is not clear. Meanwhile, initial claims for unemployment insurance have started moving down again. For the week ending June 12, the seasonally adjusted figure for initial claims was 336,000, some 15,000 below the previous week's revised figure of 351,000, the U.S. Labor Department reported on June 17. The department's four-week moving average for initial claims, which smoothes out week-to-week variations, also moved lower last week. It stood at 343,250, some 2,750 below the previous week's unrevised average of 346,000.

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