U.S. Inflation Unchanged At Producer Level; Inventories Rise

By John S. McClenahen When the federal government's economists added up their price changes for all finished goods in December, they found zero inflation. The overall Producer Price Index (PPI), a closely watched indicator of price changes, was unchanged in December following a 0.4% decline in November and a 1.1% advance in October of last year, reports the U.S. Labor Department. Meanwhile, the so-called core PPI -- the overall index minus price changes for food and energy -- posted a 0.3% decline in December. That's good news for consumers but bad news for businesses that want to raise prices to improve profit margins. "While goods prices continue to deflate, since service prices are still rising, outright deflation [across the U.S. economy] remains unlikely," says David Rosenberg, chief North American economist at Merrill Lynch & Co., New York. Separately, the U.S. Commerce Department says U.S. business inventories -- not including semiconductors -- totaled $1.136 trillion at the end of November 2002. That figure was up 0.2% from the downward revised mark of $1.133 trillion for the end of October. That downward revision, says Rosenberg, raises the possibility that in the fourth quarter of 2002 the U.S. economy was growing at less than the already weak 1.2% annual rate that Merrill Lynch has been predicting. The U.S. Commerce Department is slated to release its initial report on fourth-quarter 2002 GDP on Jan. 30.

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