INSTANT VIEW-Market reaction to U.S. producer prices
www.forbes.com Reuters, 03.14.03, 8:55 AM ET
NEW YORK, March 14 (Reuters) - The following is comment on from stock market analysts on Friday after the Labor Department reported the producer price index rose 1 percent in February. Overall producer prices climbed higher than analyst forecasts for a 0.7 percent rise, after a 1.6 percent increase the previous month. Stripping out volatile food and energy costs, prices dropped 0.5 percent, pulled down by falling car, truck and computer prices. Analysts were expecting so-called core inflation to be unchanged.
RICK MECKLER, PRESIDENT OF LIBERTYVIEW, JERSEY CITY, NEW JERSEY: "I don't think it will have much of an impact. The numbers have been moved around quite a lot by the unusual energy price movement, but I don't think the treasury market currently is as dominated by these types of numbers as it is by the potential for war with Iraq. While the number could have had meaning in another time, at this point it goes virtually unnoticed. I think it will be a non-factor to the market. "People had expected energy prices are much more volatile than they're likely to be in he future. Production is very weak and it's very hard for companies to raise prices. It's certainly part of the reason why the stock markets had trouble as companies are pressured by higher commodity prices but can't raise prices and pass it on. "It just shows excess capacity and the difficulty companies have in raising prices. I think that the danger is in lower profits rather than there is in greater inflation because of no ability to pass commodity price increases on."
TIMOTHY GHRISKEY, MONEY MANAGER WITH GHRISKEY CAPITAL PARTNERS LLC: "The month-over-month PPI was well above expectations, though excluding the volatile food and energy it was negative, showing deflation at the producer level. The year-over-year PPI is calculated at 3.5 percent, showing a moderate level of inflation, though again excluding food and energy it is showing only a measly 0.1 percent. "The data shows a significant jump in energy costs which have been caused by short-term factors like Iraq and Venezuela. But at the core level, excluding food and energy, producer price increases remain virtually no-existent. "No price increases means no inflation and clearly this is a no-inflation report when excluding food and energy. The stock market appreciates a low interest rate environment, as does the bond market, and this report leaves room for the Fed to lower interest rates again if they so choose."
PAUL CHERNEY, CHIEF REAL-TIME MARKET ANALYST AT S&P MARKETSCOPE: "I don't think (the numbers) will have material impact on the markets. When you look at the ex-food and energy, which was down 0.5 percent, there's plenty of people willing to discount the rise in the headline number due to the surge in energy prices related to the Iraq situatation. "When you look at ex-food and energy, it tells you inflation is not a problem, and that it doesn't appear that manufacturers are able to expand margins and pass costs on to consumers. So it's somewhat of an indication that the economy remains weak. But what's driving the markets now is hopes for a delay or an animation of military action in Iraq. Thats' what spurred the markets yesterday."