This afternoon the Federal Open Market Committee decided to give the economy a little Christmas present by moving to lower the Fed Funds rate by a quarter point to 5.5%. Chairman Greenspan reportedly stated that the absence of any evidence of inflation was an important factor behind the Fed decision. If you're a regular reader of these articles you will recall that in recent weeks we analyzed the Producer Price Index, the Consumer Price Index, the Index of Sensitive Commodity Prices, Real Earnings, and the Columbia University Leading Inflation Index, and concluded that none of these indicated the presence of inflation. We'll continue to examine these and other inflation indicators for clues to future Fed actions.

Too little, too late -- may be the reaction of the nation's retailers to today's Fed move. This morning Mitsubishi Bank/Schroder-Wertheim reported that chain store sales for the week ended December 16 were up just 0.2%. This follows a rise of only 0.1% in the preceding week, and drops of 0.2% in each of the two weeks before that. This afternoon the Johnson-Redbook survey reported that sales during the first three weeks of December had fallen by 2.4% compared with November.

Also today, Telecheck, the country's largest check acceptance company, reported that same-store sales for the first 24 days of the Christmas shopping season were down 6.2% compared with the same period last year. This actually indicates a pick up in sales over the past week. Last week Telecheck reported a drop of 7.2% for the first 17 days of the season.

But, any ray of retailer hope generated last week couldn't help but be dimmed by this week's re-furlough of approximately 250,000 federal employees. Those quarter-million consumers are not apt to be in a free-spending holiday mood when they aren't sure of whether or when they'll receive their next paycheck.

Byline: Lafferty (MF Merlin)