There was a flood of economic news today. Reports were released on the November data for the Consumer Price Index, Industrial Production, Capacity Utilization and Real Earnings. In addition to this, reports came out on the status of Manufacturing and Trade Inventories and Sales during October and new claims for unemployment insurance for the week ended December 9. We'll review all these indicators in chronological order.

Sales and shipments by manufacturers, wholesalers, and retailers were down 0.4% during October. This follows a revised rise of 0.3% during September. For the year to date, sales have risen at an annualized rate of 2.84%, well below last year's growth rate of 7.87%. This year's sales growth rate is the slowest since the 1990-91 recession.

Manufacturers', wholesalers' and retailers' inventory levels grew by 0.6% in October, marking the 19th consecutive monthly advance. September's rise was revised upward from 0.3% to 0.5%. The 1995 annualized rate of growth is 8.25%, a little bigger than last month's 7.99%, and right up there with the cyclical highs of 7.81% in 1988 and 9.27% in 1984.

Moving along in time, today the Federal Reserve reported that its Index of Industrial Production rose by 0.2% during November to a reading of 122.8. The Fed said that if the effect of the Boeing strike was subtracted the November reading would have increased by 0.1 to 122.9. The Index grew at an average annual rate of 4.9% from the end of the 1990-91 recession to February of this year. From February to November this year the Index grew at an annualized rate of only 0.87%.

Along with its report on Industrial Production, the Fed also released its November report on Capacity Utilization -- the percentage of the nation's productive capacity that was employed during the month. During November capacity utilization edged down 0.1% to 83.1%. The November number is 2.1% lower than a peak of 85.2% made in January of this year. Historically, there is an inverse relationship between capacity utilization and the unemployment rate. Last week I reported that between October and November the percentage of unemployed persons edged up from 5.46% to 5.61% of the civilian labor force. So, it appears that this inverse relationship is indeed manifesting itself.

The Consumer Price Index [CPI] for urban consumers was unchanged during November. For the 12-month period ended in November, the Index increased by 2.6%. This extends the recent stretch of low and essentially constant inflation to fifty-nine months. And, if you believe the UCLA forecast I reported on yesterday, inflation should stay at a low and essentially stable level of less than 3% for the next three years. The next best thing to no inflation is a low and predictable rate of inflation, and these are exactly the conditions that we are presently experiencing.

Today the Bureau of Labor Statistics reported that real average weekly earnings fell 0.4% from October to November. Data on average weekly earnings are collected from the payroll reports of private nonfarm establishments. Earnings of full-time and part-time workers holding production or nonsupervisory jobs are included. Real average weekly earnings are calculated by adjusting earnings in current dollars for changes in the Consumer Price Index. For the year ending in November, real average weekly earnings fell by 0.1%. For the nearly five-year period between January of 1990 and November of 1995, real average weekly wages fell 1.6%. No signs of inflationary pressure from the labor front.

And, speaking of the labor front, the Labor Department's Employment and Training Administration reported today that the number of Americans filing initial claims for state unemployment benefits for the week ending December 9 fell by 37,000 to 341,000. This was the largest drop since the week ended July 29, when claims fell 51,000. To smooth out the effects of short-term fluctuations in claims, the Labor Department also calculates and publishes a four-week moving average of initial claims. This is obtained by adding up the claims numbers for the four most-recent weeks and dividing by four. The value of this indicator for the week ended December 9 was 366,000. This is 11.2% higher than the average for the November/December period last year.

Going back over today's reports we find: slow sales, rising inventories, slow growth in industrial production, falling capacity utilization, and a comparitively high four-week average rate of unemployment claims. We also find a low, stable rate of CPI growth and no evidence of inflationary pressure on the labor front. Altogether, we have seven pretty good reasons why the Federal Open Market Committee might choose to stimulate the economy by lowering interest rates next Tuesday. Will they do it? What's your guess? Send me an E-mail with your opinion and I'll post the results in Monday's article and next week's Weekly Fool.

Byline: Lafferty (MF Merlin)