Sept. consumer prices could shock The week ahead

October 15, 1990|By Chicago Tribune

This has been a sobering autumn for the Federal Reserve Board. With foreign capital fleeing U.S. shores and oil nudging $40 a barrel, the Fed is left with mostly unhappy choices. Allow interest rates to fall and the dollar gets weaker, as additional money departs for overseas. Leave interest rates alone and the economy loses sap as stock prices tumble. Inflation, meanwhile, lubricated by the oil shock, has run rampant just when the economy appears to have entered a state of torpor. Friday's report on wholesale inflation showed prices galloping ahead 1.6 percent in September. That was on top of a 1.3 percent gain in August. With numbers like that, Fed members probably would just as soon forget Thursday's upcoming report on inflation at the consumer level.

Watch for: Another shocker, with a leap in the consumer price index for September of 0.9 percent. As long as the increase stays below 1 percent, some analysts can be expected to call for the Fed to ratchet interest rates downward.


Recession talk refuses to be silenced, though not all analysts agree the United States has entered a slump. If a recession is underway, it probably began in June, says professor Victor Zarnowitz of the Graduate School of Business at the University of Chicago. "There was a decline in July and August in economic indicators relating to employment and industrial production," he notes. Zarnowitz says it takes about six months to clearly identify a recession.


The Commerce Department on Wednesday reports housing starts for September and the Federal Reserve reports industrial production for September. Commerce on Thursday reports merchandise trade figures for August. In Bloomington, Ind., the RCA television assembly plant, the world's largest, is slated Thursday to produce its 50 millionth set.


The Dow Jones industrial average tumbled 112.62 points last week to end at 2398.02, a loss of 4.5 percent. It stands 20 percent below its mid-July record high close of 2999.75.

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