Price Strength Is Back, and We've Got It

Plus, an examination of cabbie-tipping conditions in Gotham.
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What's Your Sign?

NEW YORK -- The cab drivers are throwing me awfully kind smiles.

Is it because half the fare isn't a normal tip?

Or because they find me cute?

The November

import price

indices were

released this morning.

Overall non-oil import prices and the prices of non-oil goods coming from the Asian NICS have turned a corner this year following three straight ones of deterioration. The prices of non-oil goods coming from Japan turned last year and are now rising at rates not seen in about four years.

Recall the

following central bank quote.

Important sources of restraint on inflation in the current episode have come from the decline in energy prices over 1997 and 1998; the appreciation of the dollar over the three years through mid-1998 and the resulting decline in non-oil import prices; sharper-than-previous declines in computer prices over the past three years; and a slower rate of increase in health care prices, including the cost of health care insurance. Given that all of these developments have at best a transitory effect on inflation, as the inflation benefits of the shocks dissipate or as the shocks reverse, inflation is likely to rise somewhat. Indeed, virtually every forecast projects a modest rise in broad measures of U.S. inflation this year, reflecting the dissipation or reversal of favorable supply shocks, most importantly the reversal in the path of oil prices, the stabilization of commodity prices and non-oil import prices, and some rebound in health care costs.

No. The point here is not to suggest that the broad price measures are set to surge.

It recently took the

Consumer Price Index

only 14 months to shed 1.9 percentage points -- it decelerated to 1.4% in February 1998 from 3.3% in December 1996 -- but it's taken 20 to add back just 1.2 (it is currently

rising at a 2.6% year-on-year rate). The

gross domestic product price index

dropped half a percentage point last year alone; it will add only about two-tenths this year.

Good price-front luck isn't unwinding as quickly as it hit -- but it is clearly unwinding.

That would be the point.

Anyway.

I just saw a Ski New Jersey billboard.

Is that for real?

Side Dish

The market's looking for the overall

Producer Price Index

to print two-tenths and for the core (excluding food and energy) PPI to print 0.1%. My spreadsheet spits out numbers bigger than that, but I generally suck at predicting the broad price measures. The better forecasters are calling for nice figures.

Jim Bianco of

Bianco Research

points out that the December

Beige Book

used the word "slow" to describe some part of economic activity no fewer than 10 times. That's more "slow" mentions in any Beiger going back at last two years -- including last autumn's global crisis (when policymakers cut rates three times). Earlier today, meanwhile, a district bank president was telling reporters that he is still expecting somewhat slower growth next year.

The nugget below comes from the

minutes of an

FOMC

meeting that's almost two years old now.

The staff forecast prepared for this meeting indicated that the expansion of economic activity would slow appreciably during the next few quarters of 1998 and remain moderate in 1999.

Uhh ... do you come here often?

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