9311djl (02/11/83)
W E E K L Y B U S I N E S S S U M M A R Y
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Vol. I No. 17 February 11, 1983
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HEADLINES
o+ The Labor Department reported this morning that the Producer
Price Index fell a full 1% in January. This news is certainly
encouraging because falls in wholesale prices inevitably result
in falls in consumer prices. Being the largest ever recorded,
the drop will certainly send bullish aspirations to the financial
markets. Look for the Dow Jones Industrial Average to toy with
its all-time record high in today's stock market session.
o+ The U.S. trade deficit for manufactured goods was at $3.4 billion
in December as exports totaled $16.3 billion and imports totaled
$19.7 billion. The strength of the dollar, which makes imports
cheaper and exports dearer, was the culprit. For 1982, the
merchandise trade deficit was at $42.7 billion, and the total
trade deficit, including services and goods, is estimated to be
$6.0 billion the first deficit since 1979.
o+ Americans took on $2.2 billion in more installment debt than they
paid off in December. This unexpected jump in debt was the
second straight advance as car loans paced the increase.
Outstanding credit ended the year, 1982, at $343.4 billion up 3%
over 1981's final tally. With such advances in debt, we can take
this to mean that consumer spending, especially for big ticket
items like cars and appliances, is getting stronger.
o+ Retail sales for the month of January rose a mere 0.1% as
consumers bought less autos than expected. The level of sales
totaled $91.58 billion up 0.1% from December's revised level of
$91.48 billion (which was down 1.1% from November as opposed to
the 0.4% announced earlier). Auto and auto parts sales fell 2.7%
while all other product sales rose a modest 0.8%.
o+ The number of Americans filing for initial claims for
unemployment benefits ballooned in the week ending Jan. 29 by
52,000 to 517,000. The jump leads business watchers to believe
that long term unemployment is still on the rise. But, note that
these numbers tend to be volatile, and thus, their short term
behavior does not accurately predict the trend in overall
unemployment.
o+ The Treasury Department has noted a spurt in the demand for $50
and $100 bills. They believe that one cause is the burgeoning
underground economy whose cash transactions are difficult to tax
to say the least. Economists have estimated this "sub-economy"
registers almost $400 billion annually nearly 12% of GNP. One
possible solution to the increased demand, although an unlikely
one to be instituted, is to eliminate the large bills.
o+ One leading indicator of the prospects of the economy is the
level of commodities prices for raw materials and food stuffs.
In the past few weeks prices have been steadily rising signaling
a possible recovery.
Jan. 31 Jan. 24 Dec.31
Raw Materials Index 236.8 234.6 227.2
Foodstuffs Index 231.8 228.2 227.6
Falling Oil Prices - Good or Bad?
As the OPEC nations squabble over how much oil to pump and how much to
charge for it, Americans are enjoying the falling prices of petroleum
products. If prices continue to fall, favorable general deflationary
trends will indeed occur and oil usage may increase. But is this good
or bad? Obviously, it's good for individual consumers. But as a
nation, can we afford to become more dependent on foreign crude or
should we impose import tariffs that would induce consumers to
conserve? Free market interaction is desirable for all goods and
services. However, for a resource on which our economy is certainly
dependent and for which we import nearly half of our needs, we must
think of long term solutions. We must become more self sufficient in
energy production so that the fortunes and misfortunes of our economy
are not based on the desires and misfortunes of the Middle East.