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1. Inflation Remains Above Fed Comfort Zone
2. Govt.: Home Prices Rising at Slowest Pace in 8 Years
3. India's Economy Grows 9.2%
4. Jobless Claims Jump Unexpectedly
1. Inflation Remains Above Fed Comfort Zone
U.S. core consumer prices kept rising in October and new claims for unemployment
benefits unexpectedly shot higher last week, according to government reports on
Thursday that implied the economy faces continuing pressure to keep growing
without spurring inflation.
Core consumer prices excluding food and energy items rose 0.2 percent, the same
as in September. On a year-over-year basis, core prices gained 2.4 percent in
each of September and October.
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The prices data was included in a Commerce Department report that showed U.S.
incomes rose 0.4 percent in October after a 0.5 percent rise in September while
spending grew at a 0.2 percent rate after declining 0.2 percent in September.
Separately, the Labor Department said new claims for unemployment pay rose a
higher-than-expected 34,000 to a seasonally adjusted 357,000 last week -- a
surprise since Wall Street analysts had forecast they would instead ease to
314,000.
Analysts said the data reinforced an impression that the Federal Reserve will
keep interest rates on hold for some time as it weighs how the economy copes
with strains it is facing.
"The economy is moving ahead, but inflation still really is higher than the
Fed's stated target," said Andrew Richman, managing director of Suntrust's
personal asset management division in West Palm Beach, Florida. "I think the Fed
will not take any action for a while."
Stock futures were up after the data was issued and bond prices were modestly
stronger on the apparent hope that the Fed will keep rates on hold. The dollar,
which has been battered in recent sessions, held steady at weaker levels.
Some analysts played down the significance of the jump in jobless claims, noting
that the U.S. Thanksgiving Day holiday last week may have distorted the numbers.
Still, a weakening housing sector may lead claims to rise in coming months.
"You shouldn't be surprised to see some deterioration in claims, picking up
perhaps due to layoffs in the housing and mortgage industries," said Mark Vitner,
senior economist with Wachovia Securities in Charlotte, N.C.
Rising incomes ahead of the key holiday shopping season from Thanksgiving to
Christmas provide the means for shoppers to keep spending, but early data on
sales suggest there may be some reluctance to shop heartily.
U.S. retailers on Thursday reported mixed November sales results at stories open
at least a year, with disappointing numbers from Gap Inc. (NYSE:GPS - News),
J.C. Penney Co Inc. (NYSE:JCP - News) and Kohl's Corp. (NYSE:KSS - News).
In addition, Wal-Mart Stores Inc. (NYSE:WMT - News), the world's biggest
retailer, said it expects little improvement in December sales, as it confirmed
November same-store sales dropped 0.1 percent, the first decline in more than 11
years.
The Commerce Department report showed that overall consumer prices rose 1.5
percent on a year-over-year basis during October, the smallest rise since a 1.4
percent gain in August 2002.
© 2006 Reuters.
Editor's Note:
2. Govt.: Home Prices Rising at Slowest Pace in 8 Years
Home prices in the U.S. rose at the slowest pace since 1998, reports the Office
of Federal Housing Enterprise Oversight (OFHEO).
The OFHEO says home prices rose at an annual pace of 3.5 percent in the third
quarter, the slowest price appreciation since 1998.
Prices rose just 0.9 percent from the prior quarter, compared to the
quarter-over-quarter increase of 1.2 percent in the second quarter. Home prices
are up 7.7 percent compared to a year ago, whereas prices were up 10.1 percent
for the year in the second quarter.
Five states experienced falling prices in the third quarter. Four of the five
states are in the Northeast - New York, Rhode Island, New Hampshire and
Massachusetts - indicating that the areas' real estate market is going through
some tough times.
Michigan is the other state posting a price drop in the third quarter. The state
has been hit hard by the struggling auto industry. Michigan also posted a
year-over-year price decline of 0.6 percent. That was the first time in six
years that any state had prices fall in a 12-month period.
More than half of the cities in California experienced falling prices in the
third quarter. California is arguably the biggest real estate bubble in the
nation; so when its cities start to pop, get ready for more damage to come.
States keeping housing prices afloat included Idaho (17.5 percent year-over-year
increase), Utah (17.4 percent), and Oregon (16.9 percent).
Real estate is clearly a regional market, with some areas performing better than
others. But overall, it's obvious that the housing bubble is bursting.
Editor's Note:
3. India's Economy Grows 9.2%
India's economic growth accelerated to 9.2 percent in the July-September quarter
compared with a year ago, the government said Thursday, bringing it closer to
China's sizzling growth rate.
Fueled by a brisk expansion of the services sector and a surge in manufacturing
output, India's gross domestic product expanded at a faster pace than the 8.9
percent growth in the previous quarter.
The numbers beat expectations and prompted many analysts to revise their
forecasts for the full fiscal year through March 2007.
"We are revising our full year growth estimate to 8.4 percent from 7.9 percent,"
said Shubhada Rao, chief economist at Yes Bank.
If that projection comes true, it would be the fourth straight year of 8
percent-plus growth for India, one of the world's fastest-growing economies
after China, which grew 10.4 percent in the July-September quarter.
Some analysts expected GDP growth to moderate through the later part of the year
because of high oil prices and a possible slowdown in global demand for Indian
exports.
But manufactured output rose 11.9 percent during the July-September period
compared with 8.1 percent in the same period last year. The growth was mostly
driven by a surge in exports.
High oil prices have also pushed inflation and interest rates, and many thought
that would also impact services such as transportation, banking and trade.
But the services sector, which accounts for more than half of India's GDP,
continued to be buoyant. Trade, hotels and transport services expanded 13.9
percent, while financial services business grew 9.5 percent.
"The upside surprise relative to our forecast came almost entirely from the
unexpected acceleration in service sector activity," said Rajeev Malik, a
Singapore-based economist with JP Morgan Chase Bank.
JP Morgan was revising its forecast for India's economic growth in the current
fiscal year to 8.4 percent from an earlier projection of 8 percent, he said.
Malik said he expects India's central bank to hike key interest rates by at
least a quarter percentage point in December or January to keep inflation under
check. "The Indian economy is not overheating, though the impressive growth
momentum is showing some signs of excesses."
The sluggish performance of the agriculture sector, however, remained a concern.
During the July-September period, farm output grew just 1.7 percent, sharply
down from 4.1 percent in the same quarter a year ago.
About two-thirds of India's 1 billion people live on agriculture and most of
them earn less than a dollar a day. They has been left untouched by India's
economic boom over the past decade -- which has been driven by the expansion of
industry and services.
© 2006 Associated Press.
Editor's Note:
4. Jobless Claims Jump Unexpectedly
The number of U.S. workers applying for jobless benefits rose a
higher-than-expected 34,000 to a seasonally adjusted 357,000, according to a
government report on Thursday.
The latest figures from the Labor Department cover the week ending Nov. 25.
Analysts polled by Reuters had predicted claims would edge down to 314,000.
Claims in the prior week were revised slightly to 323,000 from the prior
estimate of 321,000.
The Thanksgiving holiday contributed to the relatively big rise in seasonally
adjusted claims because actual claims fell less than anticipated by statistical
factors, a Labor Department official said.
The four-week moving average, considered a more reliable measure of underlying
employment trends because it irons out such weekly fluctuations, edged up to
325,000 from 317,750.
The number of people drawing continuing jobless benefits gained 45,000 to 2.48
million in the week ended Nov. 18, higher than the 2.45 million continuing
claims analysts were expecting.
© 2006 Reuters.
Editor's Note:
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