The Consumer Price Index
The data pointed towards a diminishing inflation risk. Core inflation continues to moderate. Of course if you need to eat or drive, prices are still rising at a brisk pace.
On a seasonally adjusted basis, the CPI-U advanced 0.7 percent in
May, following a 0.4 percent increase in April. The index for energy
increased sharply for the third consecutive month--up 5.4 percent in May. The index for petroleum-based energy rose 9.8 percent while the index for energy services declined 0.2 percent. The food index rose 0.3 percent in May, slightly less than in April. The index for all items less food and energy advanced 0.1 percent in May, following a 0.2 percent rise in April. Smaller increases in the indexes for shelter and medical care were responsible for the moderation.
Industrial Production and Capacity Utilization
Industrial production, ex-utilities output, showed strength across the board. Capacity Utilization eased slightly, which the Fed should find comforting.
Industrial production was unchanged in May after a downwardly revised increase of 0.4 percent in April. Output in the manufacturing sector edged up 0.1 percent in May, and mining output moved up 0.5 percent after declining 0.6 percent in April. The output of utilities fell 1.3 percent in May after being elevated in April because of unusually cold temperatures. At 112.7 percent of its 2002 average, overall industrial production for May was 1.6 percent above its year-earlier level. The rate of capacity utilization for total industry fell 0.2 percentage point, to 81.3 percent, a level 0.3 percentage point above its 1972-2006 average.
Empire State Manufacuring Survey
Meanwhile, the Empire State Manufacturing Survey showed surprising strength, rising much more than expected.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved significantly in June. After three months of lackluster readings, the general business conditions index bounced up 18 points, to 25.8.
The new orders and shipments indexes also rose. The prices paid index climbed several points, while the prices received index fell. Employment indexes were marginally positive. Future indexes indicated a high level of optimism for the six-month outlook, while capital spending and technology spending indexes dropped markedly.
This month, manufacturers were asked a series of supplementary questions about changes in their capital spending plans from 2006 to 2007; similar questions had been asked in the October 2006 survey (see Special Questions tab). Overall, 45 percent of responding firms indicated that they would invest more in capital in 2007 than in 2006, while roughly one in four firms reported reductions in overall capital spending.
The survey results also suggested that, of the broad categories of capital, non-computer-related equipment would see the most widespread increase in investment spending. Sales and demand trends were the most commonly cited driver of both increases and decreases in capital spending in 2007.