With the economic growth cycle now well into its sixth year, businesses normally would be expected fire off their most pow-erful cannonades of price increases. But most economists proclaim it isn’t happening. Even such giants as the cereal-makers have been forced to back down at the cash register, lowering prices by as much as 20 percent. Economists blame heavy burdens of debt among consumers, making them extremely wary, even for buying the basics. But a whiff of grapeshot can strike from any quarter. Last week, an unexpected jump in average wages of 9 cents an hour sent Wall Street into its bunkers, a-jitter about inflation. Another indicator of price pressures rolls out Friday, the producer price index for June. Economist Steven Wood of BA Securities Inc. says the report should soothe some inflation worries, showing a drop for the month of 0.2 percent, thanks to lower costs for energy. But Wood says that doesn’t mean price worries are groundless. “We clearly have upward pressure on wages,” he says. “There is a possibility the Federal Reserve will act as soon as Monday to boost short-term interest rates.”
DEEPER IN HOCK
Some surveys of consumers find that nearly half say they are struggling to pay their monthly bills. Against such a backdrop, the Federal Reserve will carefully monitor its May report on consumer credit, due out Monday. In April, such short-term debt grew by $6.6 billion. With Americans in hock at record levels, and defaults on mortgages and credit cards increasing, the Fed could create a lot of pain by boosting interest rates.
A SLIGHT RETAIL CHILL
Measurement of the plastic parade continues with June department- and chain-store sales on Thursday and the Commerce Department’s retail sales totals for the month on Friday. Store sales have been booming, helped by the belated arrival of sweltering weather across most of the country. The government number, however, may impart a slight chill, because it includes sales of cars and light trucks. Latest reports from the Big Three show that sales tailed off last month by about 1 percent.
PARADE OF VISITORS
No sooner will the Windy City recover from an onslaught of visitors for Taste of Chicago, which ended Sunday, than it readies for another influx. The Transworld Housewares and Variety Exhibit, which runs Friday through July 16, is expecting 50,000 at the Rosemont Convention Center. Another 95,000 are in sight Saturday through July 15 for the World Sports Expo of the National Sporting Goods Association, in McCormick Place.
COMPETITIVE MUSCLE
Serious reporting of second-quarter corporate profits begins any day now, and some analysts warn that the renewed strength of the dollar versus foreign currencies will hurt giant multinationals. But Chicago economist Robert Dederick says the impact will be marginal for most companies. “American corporations are much more competitive than they were in the ’80s,” says Dederick, a consultant to Northern Trust Co.
BETTING ON THE FED
The stock market was blindsided by Friday’s unexpected pressure on wages, and the Dow Jones industrial average tumbled 114.88 points amid soaring long-term interest rates. Chicago financial analyst Marshall Front says the wage situation “boosts the odds to about 50-50 that the Fed will increase short-term rates.” But, he adds, investors can take some comfort from recent history, which shows that the Fed is reluctant to boost interest rates ahead of an election. Front, of Trees Front Associates Inc., says if nothing happens now, watch for a “torture point” when Fed policymakers meet again Aug. 20.
