Producer Prices Rose in October, Driven Higher by Auto Stickers
Automobile makers raised prices and reduced dealer incentives on 2004 car models in October while California, the nation's biggest auto market, increased car taxes -- moves that prompted consumers to cut back on purchases.</br></br>That was the upshot of a slew of government data released Friday. The Bureau of Labor Statistics reported that producer prices rose a larger-than-expected 0.8% on a seasonally adjusted basis in October from the month before, largely because of higher auto prices. Meanwhile, the U.S. Census Bureau reported retail sales slipped 0.3% in October, largely due to declining auto sales.</br></br>"Manufacturers are adjusting incentives in part to see how well their products can do without incentives as the economy strengthens," said Robert Schnorbus, chief economist at J.D. Power & Associates, a market research company. "Consumers, being finicky as they are, just don't like to see incentives go down, and they're pulling back."</br></br>The Federal Reserve also reported that industrial production rose for the fourth straight month in October, but the pace of increases was curtailed by a slowdown in motor vehicle assemblies.</br></br>Some auto makers responded by fattening incentives in November. This is leading some economists to predict the October sales slowdown and the spike in prices will be temporary. "It is the pregnant pause of a wiser consumer," said David Littman, chief economist of Comerica Bank in Detroit. Underscoring expectations of a pickup in consumer spending later in the year, the University of Michigan's index of consumer sentiment rose to 93.5 in early November, stronger than the late October reading of 89.6.