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Economist Discusses New Producer Price Index, Retail Sales Numbers

Aired May 11, 2001 - 08:32   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JASON CARROLL, CNN ANCHOR: We want to update you on some economic news. Just within the past few minutes, we've gotten some numbers for you, the producer price index numbers. The PPI is up 0.3 percent in April. We also have retail sales numbers for you as well. Those numbers are up 0.8 percent -- that is a little stronger than expected.

Joining us right now with all of the latest on what these numbers mean to all of us, we welcome Rajeev Dhawhan. He's director of the Economic Forecasting Center at Georgia State University, right here in Atlanta, Georgia.

Thank you so very much for joining us.

To a non-numbers person, tell us, what does this all mean?

RAJEEV DHAWHAN, GEORGIA STATE UNIVERSITY: I think retail spending being up means that people are still spending; however, we still have to keep an eye on it because people can stop spending if they start losing their jobs or the prices go up. The PPI number being up means bad news on the inflation front, at least from the producers' point of view, which can cause trouble. But at this point, the Fed is being really aggressive, and they will cut the rates to keep the economy going.

CARROLL: I'm curious which set of numbers do you think are more important. Or are they both equal?

DHAWHAN: They all add to the picture, but I think that, at this point, the regional sales numbers are important because we want to see whether the consumers are spending or not, whether we'll have the pullback totally, which means bad times ahead, or they'll still spending.

CARROLL: In terms of the big picture, as you say, what do you think this means for the economy? What is it telling us?

DHAWHAN: The economy is weak.

CARROLL: Yes, that we know. We know that much.

DHAWHAN: That we know. We don't want it to get any more weaker. So if people are still spending money, which shows up in retail sales -- I haven't seen the components as yet, so I don't know what caused the big jump -- suppose everything is fine -- it tells me that people are feeling a bit more confident than they were a few months ago.

CARROLL: Housing sales are still doing relatively well. That also is a good sign.

DHAWHAN: The interest rates are down, so people like to build more houses or get a new mortgage.

CARROLL: What do you think these numbers are going to mean next week when the Fed decides to meet. What are your predictions there?

DHAWHAN: That is where I said it's mixed news. The PPI being up means the inflation pressure is still there, but that could be because of the oil prices and other stuff. The Fed will probably disregard it because they are more worried about the softening in the economy, the consumer pulling back, rather than the inflation, at this point.

CARROLL: So do you think they're going to disregard it?

DHAWHAN: I would expect them not to worry too much about inflation. If this were a year ago, this would have meant a rate hike, but at this point, this means they will err on the side of caution -- cut the rates and get the economy booming -- and then we'll come back and take care of it.

CARROLL: OK, Rajeev Dhawhan, director of the Economic Forecasting Center at Georgia State University, thank you so very much for coming in this morning and making those numbers a lot more palpable for some of us who do not understand them as well as we should. Thank you.

DHAWHAN: Thank you, Jason. Thank you.

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