A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



November Consumer Prices Rise 0.2%

U.S. consumer prices rose modestly in November as a surge in energy costs a month earlier moderated, the Labor Department said on Friday.

The Consumer Price Index, widely taken as a gauge of inflation risks, was up 0.2 percent as Wall Street economists had forecast after registering a 0.6 percent jump in October.

Even excluding volatile energy and food costs, CPI advanced 0.2 percent in November after a matching gain in October. Overall energy prices increased 0.2 percent last month after a 4.2 percent October rise.

Financial markets paid scant attention to the monthly data and more to the annual rate of price rises, which was roughly double last year's pace and enough to set nerves on edge.

The government said that during the first 11 months of 2004, the CPI has risen at a 3.7 percent annual rate, nearly double the 1.9 percent rise for all of 2003.

The so-called core inflation rate, which strips out food and energy items, also is running well ahead of last year's pace and at a level that analysts speculated means the U.S. Federal Reserve will keep lifting interest rates.

Separately, the Economic Cycle Research Institute, an independent forecasting group, on Friday said its weekly leading index advanced to 133.6 last week compared with 133.0 in the prior week.

The ECRI's managing director, Lakshman Achuthan, said it was too soon to predict a surge in growth but the figure "is consistent with the cyclical rise in inflation that we see confirmed today by the Consumer Price Index report."

The dollar strengthened against the euro after the CPI data reinforced the belief that U.S. interest rates will continue to rise. Bond prices initially rose but by midday were broadly lower, largely on technical factors.

Stock prices weakened, with the Dow Jones Industrial Index off more than 40 points at midday and the high tech-laden Nasdaq composite index down about 5 points.

Core CPI in the first 11 months rose at a 2.3 percent annual rate, more than twice the 1.1 percent rise in 2003...