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Reports point to lower food prices, more hiring

A shopper looks at jewelry Monday at a Costco store in Mountain View, Calif. Consumers spent less on cars, furniture and food in May, sending retail sales down for the first time in nearly a year, but food and gas prices may spur spending.

Associated Press

A shopper looks at jewelry Monday at a Costco store in Mountain View, Calif. Consumers spent less on cars, furniture and food in May, sending retail sales down for the first time in nearly a year, but food and gas prices may spur spending.

WASHINGTON — Some relief from high gas and food prices could be on the way.

Wholesale food prices fell last month by the most in nearly a year, and gas prices keep dropping after peaking in May. A separate survey suggests executives are feeling more optimistic and will hire more in the second half of this year.

It amounted to welcome news Tuesday after a rough patch that has stoked worries that the economic recovery is slowing. More jobs and lower prices would both give Americans more money to spend on other things and rejuvenate economic growth.

Food prices at the wholesale level fell 1.4 percent, the Labor Department said. It was the largest drop since June 2010. About 40 percent of that decline resulted from steep declines in vegetable and fruit prices.

The drop in food prices followed harsh winter freezes, which had driven up prices of tomatoes and other vegetables in February. Even if prices don't fall further, economists say they probably won't go much higher.

"That's a good thing for consumers, and it's even better that it comes in parallel with lower energy prices," said Gregory Daco, a U.S. economist at IHS Global Insight.

Overall, the producer price index, which measures price changes before they reach the consumer, rose 0.2 percent in May. That's much lower than April's 0.8 percent gain and signals that inflation is in check.

For now, Americans remain cautious about spending. Another report Tuesday showed that retail sales fell 0.2 percent in May. It was the first decline in 11 months and came mostly because Americans bought fewer cars.

Auto sales fell 2.9 percent, the sharpest drop in 15 months. The decline was attributed to temporary factors, including fewer incentives by dealerships and a shortage of popular fuel-efficient cars because of disrupted shipments after the Japan earthquake. Excluding the drop in car sales, retail sales rose 0.3 percent.

Mark Vitner, an economist at Wells Fargo Securities, said the retail sales report shows that household budgets are still tight, forcing people to put off buying expensive items. Sales at electronics and furniture stores dropped in May.

Lower food and gas prices "should provide some near-term relief," Vitner said, "but a sustainable pickup in spending will not likely occur until job growth picks up and the unemployment rate falls."

There were some encouraging signs that hiring could pick up in the second half of the year. The Business Roundtable, which represents chief executives for the 200 biggest U.S. companies, said 51 percent of chief executives plan to step up hiring in the second half of the year.

ManpowerGroup, one of the nation's largest staffing companies, said the proportion of businesses that plan to hire in the next three months is higher than at any time since the end of 2008, during the recession.

Melanie Holmes, vice president at ManpowerGroup, said the company's employment outlook is still at only about half the level associated with a healthy economy.

>>FAST FACTS

Inventories up

U.S. businesses added to their stockpiles for a 16th consecutive month in April. But their sales grew at the slowest pace in 10 months, supporting other data that show the economy weakened this spring. Supply levels grew 0.8 percent in April and sales rose for a 10th straight month, the Commerce Department said Tuesday. But the 0.1 percent sales increase was the smallest since sales fell 0.5 percent in June of last year.

Reports point to lower food prices, more hiring 06/14/11 [Last modified: Tuesday, June 14, 2011 10:03pm]
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