U.S. economy is cooling says BMO Nesbitt Burns

Low capacity utilization, import competition keep prices down

By: IE Staff
July 10, 2000 July 10, 2000
08:37

(July 10 – 9:40 ET) – BMO Nesbitt Burns Inc. economists suggest that the U.S. economy is cooling, the Fed should be sidelined and investors can relax.

“Equity and bond investors alike may take heart in coming weeks due to news that U.S. core inflation is not rising. That would reinforce the impression that the Fed will stay on hold,” says BMO Nesbitt Burns, citing several reasons for its optimism: low capacity utilization; intense import competition; numerous economic indicators that suggest slowing; tight labour markets that aren’t producing wage pressures; and higher energy prices just starting to bite.

As a result, BMO Nesbitt forecasts that the June core Producer Price Index will likely be 0.1%, keeping the core rate just above 1% this year. It believes that several one-time factors will also help hold core PPI down. “But, more fundamentally, conditions in U.S. markets do not favor price increases, and we expect the more moderate trends in pipeline costs will keep finished goods prices cool.”
-IE Staff