U.S. economic recap – October 10, 2005

U.S. economic recap – October 10, 2005

The week ends with an economic groan as the Consumer Price Index (CPI) weighs in with its largest rise in 25 years. The actual results, however, when distilled into their finer parts are little more reassuring. Despite rising 1.2 percent in September, 90 percent of the CPI’s rise, according to the US Department of Energy, can be attributed to the soaring cost of fuel in the wake of Hurricane Katrina and Rita. Energy prices reportedly rose 12 percent shortly after Katrina though they have been slowly declining as more and more refineries slowly come back online. When one factors out the volatile fuel and food sectors and simply takes the “core” CPI into account, it only rose 0.1 percent in September. Steel production output has good results Overall, domestic steel producers noted a rise in output for the week ended October 8 according the American Iron and Steel Institute. Total steel production was about 1.995 million net tons, a week-to-week rise of about 0.3 percent from 1.990 mnt. Year-to-date production totaled about 79.6 mnt which is a year-on-year drop from 84.7 mnt. Regionally, the Youngstown, Ohio/Pittsburgh produced 226’000 nt, a 4’000 nt increase from the prior week. In the Northwest Chicago/Indiana region, local steel production dropped 3’000 nt to 482’000 nt from the prior week. But industrial output drops sharply The US Federal Reserve reported that industrial output dropped to its lowest level in nearly 23 years. September noted a 1.3 percent drop which was the largest decline since a 1.9 percent tumble in 1982. The bad news, however, could be almost solely blamed on Katrina which helped account for a 9.1 percent plunge in mining output including, among other things, natural gas and oil extraction. And now some good news It was not all bad news this week as several key pieces of evidence came out that show things might be turning around after all the Katrina induced problems. For one, jobless claims actually fell last week by 2’000 according to the US Department of Labor. Overall claims fell to 389’000 for the week ended October 8 from a seasonally adjusted 391’000 for the prior week. Also, gas prices continue to decline. According to the American Automobile Association, gas prices declined for the week from $2.837 per gallon of unleaded gas to $2.816 per gallon. Gas prices peaked at $3.057 on Labor Day but have declined somewhat since then as more refineries have gradually come back online. Still, prices are a far cry higher from a year ago when they were $1.989. Diesel prices also eased somewhat since reaching new records every day last week. Still, the change was relatively insignificant falling a tenth of a cent to $3.184. The real story lies in the inexorable approach of winter. Home heating costs will prove the true test of consumer’s wallets. The Energy Information Administration says the average American consumer will pay 30 to 48 percent this winter to heat their homes. And, finally … Wall Street ended the week on a high note despite the wealth of scary economic news released today. The Dow Jones Industrial Average, S&P 500, and Nasdaq averages all posted gains on Friday but were down for the week. The loss was the fourth in five weeks for the indexes. The major gauges continue to hover around five month lows. The US steel index ended up for the week nearly two percent to 191.49.