Economic Indicators Dampen Likelihood Of Rate Increase

By John S. McClenahen Following considerably smaller increases in January and February, the U.S. Labor Department's Producer Price Index (PPI) for finished goods rose 1% in March. That figure is nearly a half percentage point higher than the 0.6% many economists had anticipated. Higher energy prices were the primary reason for March's increase in the PPI. Energy prices rose 5.5% in March, compared with a 0.4% gain in February. The so-called core PPI -- the index minus energy and food -- was up only 0.1% in March, exactly what economists expected. Meanwhile, U.S. retail and food-service sales rose 0.2% in March to $297.3 billion, reports the U.S. Commerce Department. That was two-tenths of a percentage point below expectations. Sales for this year's first calendar quarter were up 3.2% from the first three months of 2001. "Outside of energy, inflation is not an issue, and consumer spending remains healthy," judges Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. Bottom line: Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee are likely to leave the influential federal funds rate at 1.75% at their next scheduled meeting on May 7.

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