Financial News October 15, 2009

Consumer Prices in U.S. Increased at Slower Pace in September2009-10-15 12:30:01.146 GMTBy Timothy R. Homan Oct. 15 (Bloomberg) -- The cost of living in the U.S. rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the worst recession since the Great Depression. The 0.2 percent gain in the consumer-price index followed a 0.4 percent increase in August, as forecast, figures from the Labor Department showed today in Washington. Excluding food and energy costs, the so-called core index also climbed 0.2 percent, more than anticipated and pushed up by health care and a rebound in auto prices. Rents dropped for the first time in 17 years. The worst economic slump since the 1930s has left unemployment at a 26-year high and record levels of homes sitting vacant, signaling companies and landlords will hold the line on prices in coming months. The lack of inflation may give the upper hand to the Federal Reserve policy makers who’ve said the central back can keep interest rates low for a long time. “Substantial excess capacity in the economy has dampened the pricing power of retailers,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “Accelerating inflation has retreated as a significant near-term concern but there are also fewer fears of deflation,”or a protracted decline in prices. Economists forecast consumer prices would rise 0.2 percent, according to the median of 79 projections in a Bloomberg News survey. Estimates ranged from a decline of 0.2 percent to a gain of 0.5 percent.To contact the reporter on this story:Timothy R. Homan in Washington at +1-202-624-1961 or thoman1@bloomberg.netTo contact the editor responsible for this story:Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net New York Empire Factory Index Surges to Highest Since 20042009-10-15 12:30:01.0 GMTBy Bob Willis Oct. 15 (Bloomberg) -- Manufacturing in the New York region expanded in October for a third straight month, reinforcing signs that factories are helping pull the economy out of the worst recession in seven decades. The Federal Reserve Bank of New York’s general economic index soared to 34.6, the highest since mid-2004, from 18.9 in September, the bank said today, marking the first time the measure has shown expansion for at least three months since a period ending in January 2008. Readings above zero for the Empire State index signal manufacturing is growing. Government stimulus measures such as highway repairs and an auto trade-in program, record inventory cutbacks that set the stage for renewed production and a revival in overseas demand are helping factories expand again.Stabilization in manufacturing is one reason economists estimate that growth resumed last quarter. “The worst is over for the factory sector and the worst is over for the economy,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “Exports will increasingly be providing support to that sector. They’re at expansionary levels and that’s the key.” Economists forecast the Empire manufacturing gauge would drop to 17.3, according to the median of 50 estimates in a Bloomberg News survey. Projections ranged from 12 to 22.1. Manufacturers account for 6 percent of New York’s $1.1 trillion economy.To contact the reporter on this story:Bob Willis in Washington at +1-202-624-1837 or bwillis@bloomberg.netTo contact the editor responsible for this story:Christopher Wellisz at +1-202-624-1862, or cwellisz@bloomberg.net U.S. Initial Jobless Claims Fall to Lowest Level Since January2009-10-15 12:30:00.787 GMTBy Courtney Schlisserman and Timothy R. Homan Oct. 15 (Bloomberg) -- The number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level in nine months, indicating the improving economy is leading to a slowdown in firings. Applications fell by 10,000 to 514,000 in the week ended Oct. 10, lower than forecast, from a revised 524,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance also decreased. Fewer dismissals don’t mean that companies will boost hiring, signaling the jobless rate is likely to keep climbing in the early stages of the economic rebound. Mounting joblessness is among reasons Federal Reserve policy makers, who project the recovery will be “restrained,” are likely to keep interest rates low for months to come. “What we expect for the most part is the downward trend to continue,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. “We will probably have more sustained growth in the labor market starting in early 2010. From there we will find a peak in the unemployment rate and ultimately create jobs.” Claims were forecast to fall to 520,000 from the 521,000 originally reported for the previous week, according to the median of 41 economists’ forecasts in a Bloomberg News survey.Estimates ranged from 490,000 to 550,000.To contact the reporters on this story:Courtney Schlisserman in Washington at +1-202-624-1943 or cschlisserma@bloomberg.netTimothy R. Homan in Washington at +1-202-624-1961 or thoman1@bloomberg.netTo contact the editor responsible for this story:Christopher Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net Heard on the street... Corrective: Trade is pulling back better from the lower levels with the Philly Fed helping boost prices in a roundabout way. The market is also getting some corrective action as weak shorts get dragged out, with the curve out of joint. The once steeply steepening 2-10-yr yield spread has flipped back to flatter mode as the market reassesses its direction. The move to DJ 10K is being viewed as mostly spin, with the jump, even on a closing basis, being ephemeral, or as one long time player noted "a wanna-be. Feel good" moment.