This morning the Bureau of Labor Statistics of the U.S. Department of Labor released its report on Producer Price Indexes for February. The Labor Department's report contains data on producer prices for crude, intermediate, and finished goods. It is the finished goods producer price index (PPI) that is widely reported in the media. The finished goods PPI is a measure of the prices of goods when they are first ready for sale to the ultimate consumer. The PPI includes prices received by the manufacturing, mining, agriculture, forestry, fishing, natural gas, and electrical power industrial sectors.

In February, prices fell at all stages of the production process. The crude goods PPI fell by 0.7 percent, the intermediate goods PPI dropped by 0.4 percent, and the finished goods PPI declined by 0.2 percent. My records include monthly data on these indicators going back twenty months, and this is the first time in that twenty-month period that all three of these PPI measures declined at the same time.

When the more variable food and energy components were excluded, the finished goods index was up 0.1 percent, the intermediate index was down by 0.2 percent, and the crude goods index was down also, by 0.5 percent.

For the year to date the finished goods PPI was up 2.0 percent. This compares with last month's year-to-year rise of 2.3 percent, and an annual rise of 2.2 percent for all of 1995.

No question about it, all was quiet on the wholesale inflation front during February.

On the employment front, the Labor Department's Employment and Training Administration announced today that the number of new claims for unemployment insurance for the week ended March 9 was 353,000, a drop of 10,000 from the preceding week. The four-week moving average of new jobless claims was 364,000, down by 7,000. Although the four-week moving average has been declining for the past few weeks, the low set in the most-recent week is still higher than the preceding relative low. In other words, the plot of the four-week MA is still exhibiting a pattern of succesive higher highs and higher lows. So, this indicator is still trending upward. This week's reading of the four-week MA is 7.61 percent higher than the reading a year ago.

Speaking of employment statistics, one of our readers E-mailed the editors the other day expressing doubts about the accuracy of the 705,000 rise in nonfarm employment announced by the Labor Department last Friday. This was the announcement that triggered the precipitous drop in bond and stock prices. Well, that reader has found some kindred spirits at the Treasury Department. The Washington Post reported today on an internal memo wherein Treasury Department economists described the 705,000 gain as "statistically implausible". The Labor Department said they were as surprised as anybody by the numbers, but they checked and double checked them and still came up with the same figure. The Labor Department went on to say that, based on past experience, the worst-case correction that might be made to the figure would be 10 percent. This says that the February figure could not fall any lower than 634,500. We'll all find out on April 5. That's when the next installment of the Labor Department's Employment Situation report is scheduled for release.

Remember all those reports about a slowdown in retail sales during the past holiday shopping season? Well, a report today by the American Bankers Association (ABA) reveals that the few folks who did buy stuff back then were increasingly having trouble paying for their purchases. Delinquencies on credit card bills rose to 3.34 percent in the fourth quarter of 1995, tying a ten-year high. In fact every one of the eight loan categories that the ABA tracks had an increase in the delinquency rate last year. The ABA combines the eight loan catgories together to create what it calls its composite delinquency rate. This rate climbed to 2.12 percent in the fourth quarter, higher than any reading since the first quarter of 1993, but lower than the all-time high level of 2.75 percent set in 1992. The ABA said that if the growth in the economy continues to slow then delinquencies would continue to grow.

Byline: Lafferty (MF Merlin)