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Wholesale Prices Up, Trade Deficit Soars

Aug 13, 9:15 AM (ET)

By MARTIN CRUTSINGER

WASHINGTON (AP) - Wholesale prices edged up just 0.1 percent in July as a big drop in food costs offset the biggest increase in energy prices in six months while the nation's trade deficit soared to an all-time high in June.

The Commerce Department reported Friday that the trade deficit surged to a $55.82 billion in June, a sharp 19.1 percent increase from a May imbalance of $46.88 billion.

The June deficit was har higher than economists had been expecting. It reflected a rise in imports, pushed up by surging energy costs and a drop in U.S. exports.

The small increase in the Labor Department's Producer Price Index last month, released separately by the Bureau of Labor Statistics, followed a 0.3 percent decline in June as price pressures at the wholesale level have shown a sharp moderation over the past two months following sizable increases earlier this year.

The small July increase reflected a 1.6 percent decline in food costs, the biggest one-month drop in more than two years, reflecting cheaper costs for beef and dairy products. Food costs had also fallen in June after three months of big increases.

The price moderation last month did not extend to energy, which shot up by 2.3 percent in July, the largest gain since a 4.7 percent rise in January. Energy costs had fallen by 1.6 percent in June. Last month's sharp turnaround reflected higher gasoline costs, which rose by 5.4 percent in July after having posted a 5.2 percent decline in June.

With crude oil prices hitting record levels this week, spiking above the $45 per barrel mark, analysts are predicting that the prices paid by consumers for gasoline and other energy products will be headed higher in coming months.

Democratic presidential nominee Sen. John Kerry has raised the soaring price of energy as a campaign issue, one part of his economic indictment against President Bush.

In remarks prepared for delivery Friday at a campaign stop in Eugene, Ore., Kerry said, "When we have gas prices going through the roof, the Americans I've met don't think we've turned the corner."

The Bush administration counters that the president has an energy plan designed to lower America's dependence on foreign oil but it has been blocked in Congress by Democrats who do not want to expand oil drilling in Alaska.

The surge in energy costs this year has acted as a major drag on growth by forcing consumers to spend more on filling up their gas tanks than on other products. The overall economy, as measured by the gross domestic product, slowed to a growth rate of just 3 percent in the April-June quarter, far below the 4.5 percent pace in the first three months of the year.

In an effort to make sure that inflation does not become a problem, the Federal Reserve raised a key short term interest rate by a quarter point on Tuesday, its second rate increase this year.

Fed officials signaled that further rate increases would occur at a "measured" pace which economists have read as an indication that the Fed will make quarter point moves at its final three meetings of the year in September, November and December.

Federal Reserve Chairman Alan Greenspan told Congress last month that the "soft patch" the economy encountered in the early summer should be short-lived.

However, private economists are worried that the continued rise in energy costs, which act like a tax on consumers, will further depress consumer spending in the months ahead and could jeopardize the economic recovery.

The trade report showed that imports rose by 3.3 percent to $148.64 billion in June, an increase that was led by a huge jump in the nation's foreign energy bill, which rose to $15.22 billion in June compared to $13.74 billion in May.

U.S. exports fell by 4.3 percent in June to $92.82 billion, the lowest level in four months, reflecting broadbased weakness across a number of categories of manufactured goods.

America's trade deficits with its major trading partners rose in June. The deficit with China jumped to $14.2 billion, the highest in history, while the deficit with Japan rose to $6.27 billion and the deficit with European countries using the euro currency rose to $7.85 billion. The deficit with Canada rose to $6.63 billion and the trade gap with Mexico widened to $4.9 billion.

The Kerry campaign contends that Bush's free trade efforts have led to huge trade deficits and cost millions of American manufacturing jobs as more companies move production overseas to low-wage countries.

#1 marketing tactic:

Make people feel inadequate and helpless .

. . .then introduce your solution.


Hey, I wonder if that approach would work to sell a Pesident? hmmmm ..:rolleyes:

AHHHHHHHHHHHHHHHHHHHH!!!.....the sky is falling!

I'll never forget when Bush stole office and was talking about the Clinton recession...The chorus of DemocRATs were harping incessantly about "Bush is talking down the economy."

For the last 3+ years the Democrats have been blocking all attempts at breathing life into a faltering economy (because they don't want the economy to do good under a Republican) and they have been doing nothing but talking down the economy.

Tax cuts stimulate the economy...bottom line.

what the. . ." the amount of Republican spin "?

Take another look at this thread. The volume of spin is clearly coming from democrats.

RUN FUR THE HILLS. THE BOTTOM IS ABOUT TO DROP OUT!!!!!!!!!!
http://www.pelicanparts.com/support/smileys/behead.gif http://www.pelicanparts.com/support/smileys/explode.gif http://www.pelicanparts.com/support/smileys/cut.gif http://www.pelicanparts.com/support/smileys/pyth.gif

Lassie . . .go get help . . .go get Super-kerry.

can someone please explain to me how a huge deficit combined with record consumer debt combined with huge trade deficit combined with record energy prices can be "healthy"?

I totally serious. No pithy comments or cartoons pasted from somewhere. Please tell me what is healthy about this scenario? And I'm not saying Kerry can fix it...just please tell me how it is the economy is currently healthy.

And this out late yesterday:

<b>"Retail Sales Rebound, Jobless Claims Fall"</b>

http://news.yahoo.com/news?tmpl=story&u=/ap/20040813/ap_on_bi_go_ec_fi/economy_24

Poor oppressed and uneducated YankmeABCs. The only thing he has to hold on to is the lie about the tax cuts. Somebody send him a purple heart.

We don't look like Russia. . .something like that could have happened.

ROTFLMAO!

Republican control of the administrative, legislative and judicial isn't enough!

The recent LA Weekly headline says it all: "sore winners."

not enough coffee this morning? context?

"the number of laid-off workers filing new claims for unemployment benefits fell by 4,000 last week to 333,000,"

So, 4000-fewer people got laid off last week than the week before; and we're supposed to break out the champagne?

Repugnicans. Unsuccessful in victory and unsuccessful in defeat.

What a sad story.

You wonder what force must be working against them to so consistently thwart their plans...

Could it be...

Oh, I don't know...


SATAN?

http://forums.pelicanparts.com/uploa...1092417569.jpg

Better than in the other direction.....no?

A nice glass of Cab would be fine for me, thanks :D

Uncharacteristically grounded there...

Scenario has been healthy in a similar way that the California real estate market has been healthy - or the lead up to the bursting of the tech bubble was healthy.

You can nay say and doom predict all you want - you just get laughed at so long as the scenario sustains itself. And it will - there's always a "greater fool" next door who will borrow more to buy your tech stock/california real estate/new car at a greater price than you - no worries.

But an end has to come. It's not rocket science that real property values (or growth in any other economic measure) cannot increase sustainably at a rate greater than growth in real income. Real income is that pesky thing called GDP.

Like musical chairs - just don't be left standing when the music stops.

And it will stop.

Soon.

Trust me.

:D and I thought I could skip coffee this morn.

Anyway, I'm just say'n; our finacial situation could have gotten bad faster, and to a worse degree.

I agree. The economic news isn't all bad, but it's not the 'raging recovery' some here are trying to portray (fint, you listening?).

It's a weird mix of exceptionally high consumer confidence, uneven purchasing patterns, high consumer indebtedness rate, job growth way below projections, etc.

The $150 (taxable) we got in the Summer of '01 didn't reverse the economic slowdown that started November '00. But that wasn't a recession. 9/11 triggered the recession and we should have been out of it now, if the collective wisdom of the Fed and GWBs cadre had had the key.

:D :D :D

Who said this first? It's so funny.:)