PPI Suggests Lower Inflation; NAM President Concurs

ByJohn S. McClenahen Referring to the cadets at West Point, five-star General Douglas MacArthur said his final thoughts would be of the Corps, the Corps, the Corps. These days, referring to the inflation rate, economists thoughts are of the core, the core, the core. And the Producer Price Index, released Nov. 9 by the U.S. Labor Dept.'s Bureau of Labor Statistics, suggests that in the U.S., inflation remains well-contained -- and may well be on a decline again. Although the overall PPI rose a higher-than-expected 0.4% in October, the core PPI fell 0.1%, "weaker than expected and . . . up just 1% during the past year," stresses Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. "With [GDP] growth downshifting to a moderate path, we believe deflation will continue," he adds. What these numbers tell us "is that increases in relative prices have failed to trigger a wider acceleration in wages and prices," says Jerry J. Jasinowski, president of the National Assn. of Manufacturers, Washington, D.C. "Demand is slowing down, and productivity remains very strong, and while there may be some increases in energy prices during the winter months, on the whole inflation is still pretty well contained."