Bad news on the rise from Bloomberg. Weak economy, rising productivity, falling prices. Guess what that means?
Prices Americans paid for goods and services in May fell for a second month, the first back-to-back declines since 2001, as companies resorted to discounts to drum up demand, economists forecast that a Labor Department report will show Tuesday. The consumer price index may have dropped 0.1 percent last month after April's 0.3 percent decrease, based on the median of 53 estimates in a Bloomberg News survey of economists. Lower costs for energy may have pushed down the measure. Excluding energy and food, core consumer prices may have risen 0.1 percent after no change, the survey found. Federal Reserve policy makers have said too much slowing in inflation would be "unwelcome'' because it could lead to deflation, or a broad decline in prices. Such a development, which hasn't happened yet in the U.S., may stifle profits and business spending.
There are few signs to "suggest that the economy in the U.S. is going to bounce back anytime soon," said John G. Rice, chief executive officer of General Electric Co.'s power systems unit, in an interview. This month's Bloomberg survey of 57 economists found that gross domestic product may expand 2 percent in the second quarter before accelerating through the end of the year. The economy, which grew at a 1.9 percent pace from January through March, may grow at a 3.5 percent rate in the fourth quarter, according to the median forecast. Manufacturing stagnated in May, a Fed report may show Tuesday. Industrial production last month may have been unchanged after a 0.5 percent decrease, according to economists in the Bloomberg survey. Output at the nation's factories, mines and utilities last increased in January, when it rose 0.7 percent.
Factory capacity use last month may have held at 74.4 percent, the lowest since June 1983. During the record 10-year expansion from 1991 to 2000, capacity use averaged 82.2 percent. Robert Shearer, chief financial officer of VF Corp., the maker of Vanity Fair bras and Lee and Wrangler jeans, said Friday that second-quarter profit will fall more than expected because retailers are reducing orders for the company's goods. "We can't say we're seeing a pick-up in retail; we've not seen that improvement,'' Shearer said on a conference call with investors and analysts.