Well, sure enough, I got the World Wide Web equivalent of "Nobody Home" when I tried to log onto the computer at the Commerce Department this morning. But, the Labor Department's Bureau of Labor Statistics news release service had posted the Consumer Price Index report for October, and the Federal Reserve made sure that the Industrial Production and Capacity Utilization data for October were released to the public.

The Consumer Price Index [CPI] for Urban Consumers rose 0.3% in October to a constant-dollar level [based on 1982 prices] of 153.7. This was the largest month-to-month jump in the past 5 months. But, never fear, inflation is not just around the corner. For the 12-month period ending in October the CPI increased at the modest rate of 2.8%. This rate is right in line with the average CPI inflation level of approximately 3% that has existed for the past fifty-eight months. During this period the rate of change of the CPI has been more stable than any other period in the past 50 years. What's more the 3% average level of inflation is the lowest sustained level since the the early 1960's.

The Index of Industrial Production changed by -0.3% during October -- the first drop in 6 months. The September change was revised from a drop of -0.2% to a gain of +0.1%. So, the October drop was exactly negated by the revision in the September value. The Index measures the output of the nation's factories, utilities, mines and oil and gas wells. It is one of the four coincident indicators selected by the Department of Commerce as components of its Composite Index of Coincident Economic Indicators [CEI]. A coincident indicator is one that hits its high and low values coincident with peaks and troughs in general economic activity.

The Index was in a healthy upward trend at an annual growth rate of 4.9% from the end of the 1990-91 recession through February of this year. From February through October the Index rose from 122.1 to 122.6. The Federal Reserve Board, which releases the Industrial Production data, commented that the October change would have only been -0.1% if the effect of the Boeing strike was ignored. If this was taken into consideration, the October number would have been 122.8 and the annualized growth rate since February would have been only 0.86% -- well below the 4.9% growth rate experienced in recent years.

As part of the Industrial Production report, the Fed also released the October report on Capacity Utilization -- the percentage of the nation's productive capacity that was employed during October. The reported figure was 83.6%, down 0.5% from an upwardly-revised figure of 84.1% for September. The October figure represents a drop of 1.6% since a peak of 85.2% made in January.

History reveals that there is an inverse relationship between Capacity Utilization and the unemployment rate. When Capacity Utilization falls, unemployment rises and vice-versa. So, if Capacity Utilization continues to work its way downward, it should, sooner or later, translate into a rise in the rate of unemployment. The Labor Department's October Employment Situation Report on 11/3 showed that the unemployment rate has actually decreased slightly since the beginning of the year. On the other hand, the weekly jobless claims reports for the past couple weeks have shown some unexpected increases. There will be another weekly report tomorrow and we'll see what it has to say about the situation.

Last, but certainly not least, the Federal Reserve Open Market Committee met today to assess whether the economy needed any stimulation in the form of lower interest rates. Despite evidence of slowness in a number of sectors of the economy, the Fed decided to not act to lower interest rates. Perhaps they might have been spurred into inaction by all the politico/economic uncertainty during the past few days. Maybe they just want to wait until they see whether retailers have a lousy Christmas shopping season.

Byline: Lafferty (MF Merlin)