Empire Declines Less-than-estimates, Core Consumer Prices Tame, Jobless Claims Spike on Katrina

- Empire Manufacturing for September fell to 17.0 versus estimates of 15.0 and a reading of 23.0 in August.
- The Consumer Price Index for August rose .5% versus estimates of a .5% increase and a .5% gain in July.
- The CPI Ex Food & Energy for August rose .1% versus estimates of a .2% increase and a .1% gain in July.
- Initial Jobless Claims for last week rose to 398K versus estimates of 350K and 327K the prior week.
- Continuing Claims rose to 2590K versus estimates of 2600K and 2570K prior.

BOTTOM LINE: Manufacturing in NY state slowed this month as costs soared, Bloomberg reported. The prices paid component of the index rose to 53.4, the highest since March. The new orders component fell to 13.1 from 33.8. However, the measure of shipments rose to 31.5 from 23.9 last month. As well, the index of hiring expectations over the next six months rose to 20.2 from 15. Finally, the optimism component of the index fell to 46.5 from 58.4 in August. I would expect to see this index decline further next month before rebounding.

Prices paid by US consumers rose .5% in August as energy prices surged. Excluding Food & Energy, prices barely rose, Bloomberg reported. Prices were restrained by auto discounts, declining hotel rates and steady medical costs, Bloomberg said. The cost of medical care was unchanged in August. This is the first month in almost 30 years that medical costs didn’t rise. Moreover, computer prices are now 18% lower than at this time last year. This Core prices are rising at a 2.0% pace, compared with 2.1% in the first eight months of last year. I expect measures of inflation to accelerate for the next couple of months due to Katrina, before decelerating markedly early next year.

The number of Americans filing first-time claims for jobless benefits rose by 71,000 last week, the biggest increase in more than nine years, as people thrown out of work by Katrina filed for benefits in nearby states and at government relief shelters, Bloomberg reported. 68,000 claims were received from people who lost jobs due to Katrina. The four-week average rose to 340,750 from 321,000 the prior week. The insured employment rate, which tracks the unemployment rate, was unchanged at 2 percent. Jobless claims will increase again next week as more hurricane victims are able to file. Rebuilding will boost employment substantially during the fourth quarter.