colecrowe
02-26-2008, 11:08 AM
Stagflation, Or Just a Good Ol' Recession?(http://reason.com/blog/show/125171.html)
Brian Doherty | February 26, 2008, 9:51am
Might there be a little something to worry about in the Federal Reserve's recent let-er-rip attitude toward cutting interest rates? See the latest inflation news(http://online.wsj.com/article/SB120403199761193593.html?mod=googlenews_wsj) (http://online.wsj.com/article/SB120403199761193593.html?mod=googlenews_wsj) from the Wall Street Journal:
U.S. wholesale prices surged in January and core inflation also climbed above expectations, according to more data revealing price pressures amid the economic slowdown.
The producer price index for finished goods rose 1.0% on a seasonally adjusted basis after a 0.3% decrease in December, the Labor Department said Tuesday. Originally, prices in December were estimated down 0.1%.
The core index, which excludes food and energy items, rose 0.4% last month, seasonally adjusted. It rose 0.2% in December.
Wall Street expected smaller price increases.....
In the 12 months ending in January, prices climbed 7.4% on an unadjusted basis. In the 12 months ending in December, prices were up 6.3%. The 7.4% climb is the largest since 7.5% in October 1981.
Analyst Paul Kasriel says it ain't stagflation (http://www.marketoracle.co.uk/Article3792.html)(http://www.marketoracle.co.uk/Article3792.html) (although a bunch of people quoted in the New York Times(http://www.nytimes.com/2008/02/21/business/21stagflation.html?_r=2&scp=1&sq=stagflation&st=nyt&oref=slogin&oref=slogin) (http://www.nytimes.com/2008/02/21/business/21stagflation.html?_r=2&scp=1&sq=stagflation&st=nyt&oref=slogin&oref=slogin) and Wall Street Journal (http://online.wsj.com/article/SB120355396795281551.html)(http://online.wsj.com/article/SB120355396795281551.html) might disagree)--just a natural and predictable start-of-recession phenomenon, with inflation lagging the slowing of GDP growth.
A reason roundtable (http://www.reason.com/news/show/38384.html)(http://www.reason.com/news/show/38384.html) on the Federal Reserve, from November 2006, featuring, among others, Milton Friedman and Ron Paul.
In possibly not unrelated commentary, see some recent goldblogging from me(http://www.reason.com/blog/show/125148.html) (http://www.reason.com/blog/show/125148.html) and Matt Welch (http://www.reason.com/blog/show/125063.html)(http://www.reason.com/blog/show/125063.html).
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http://ap.google.com/article/ALeqM5jsanM66tszKz1zFq0LOG4XvWS7zAD8V21CJ01
Wholesale Prices Jump in January
By MARTIN CRUTSINGER – 3 hours ago
WASHINGTON (AP) — Inflation at the wholesale level soared in January, pushed higher by rising costs for food, energy and medicine. Prices rose at the fastest pace in 16 years.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.
But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.
The 1 percent jump in wholesale prices followed a 0.3 percent decline in December and was the biggest one-month increase since a 2.6 percent increase in November. That gain had been driven by sharply higher energy costs.
With the January jump, wholesale prices have risen over the past 12 months by 7.5 percent, the fastest increase since the fall of 1981, when the country was in a deep recession.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — The government says inflation at the wholesale level soared in January. The costs of food, energy and medicine all jumped sharply.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month. That was more than double what analysts had been expecting. It left prices rising at the fastest pace in more than 16 years.
The worse-than-expected performance was certain to capture attention at the Federal Reserve. Fed officials have chosen to combat a threatened recession by aggressively cutting interest rates, believing that they have room to do so because weak economic growth will keep a lid on prices.
Brian Doherty | February 26, 2008, 9:51am
Might there be a little something to worry about in the Federal Reserve's recent let-er-rip attitude toward cutting interest rates? See the latest inflation news(http://online.wsj.com/article/SB120403199761193593.html?mod=googlenews_wsj) (http://online.wsj.com/article/SB120403199761193593.html?mod=googlenews_wsj) from the Wall Street Journal:
U.S. wholesale prices surged in January and core inflation also climbed above expectations, according to more data revealing price pressures amid the economic slowdown.
The producer price index for finished goods rose 1.0% on a seasonally adjusted basis after a 0.3% decrease in December, the Labor Department said Tuesday. Originally, prices in December were estimated down 0.1%.
The core index, which excludes food and energy items, rose 0.4% last month, seasonally adjusted. It rose 0.2% in December.
Wall Street expected smaller price increases.....
In the 12 months ending in January, prices climbed 7.4% on an unadjusted basis. In the 12 months ending in December, prices were up 6.3%. The 7.4% climb is the largest since 7.5% in October 1981.
Analyst Paul Kasriel says it ain't stagflation (http://www.marketoracle.co.uk/Article3792.html)(http://www.marketoracle.co.uk/Article3792.html) (although a bunch of people quoted in the New York Times(http://www.nytimes.com/2008/02/21/business/21stagflation.html?_r=2&scp=1&sq=stagflation&st=nyt&oref=slogin&oref=slogin) (http://www.nytimes.com/2008/02/21/business/21stagflation.html?_r=2&scp=1&sq=stagflation&st=nyt&oref=slogin&oref=slogin) and Wall Street Journal (http://online.wsj.com/article/SB120355396795281551.html)(http://online.wsj.com/article/SB120355396795281551.html) might disagree)--just a natural and predictable start-of-recession phenomenon, with inflation lagging the slowing of GDP growth.
A reason roundtable (http://www.reason.com/news/show/38384.html)(http://www.reason.com/news/show/38384.html) on the Federal Reserve, from November 2006, featuring, among others, Milton Friedman and Ron Paul.
In possibly not unrelated commentary, see some recent goldblogging from me(http://www.reason.com/blog/show/125148.html) (http://www.reason.com/blog/show/125148.html) and Matt Welch (http://www.reason.com/blog/show/125063.html)(http://www.reason.com/blog/show/125063.html).
* * *
http://ap.google.com/article/ALeqM5jsanM66tszKz1zFq0LOG4XvWS7zAD8V21CJ01
Wholesale Prices Jump in January
By MARTIN CRUTSINGER – 3 hours ago
WASHINGTON (AP) — Inflation at the wholesale level soared in January, pushed higher by rising costs for food, energy and medicine. Prices rose at the fastest pace in 16 years.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.
But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.
The 1 percent jump in wholesale prices followed a 0.3 percent decline in December and was the biggest one-month increase since a 2.6 percent increase in November. That gain had been driven by sharply higher energy costs.
With the January jump, wholesale prices have risen over the past 12 months by 7.5 percent, the fastest increase since the fall of 1981, when the country was in a deep recession.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — The government says inflation at the wholesale level soared in January. The costs of food, energy and medicine all jumped sharply.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month. That was more than double what analysts had been expecting. It left prices rising at the fastest pace in more than 16 years.
The worse-than-expected performance was certain to capture attention at the Federal Reserve. Fed officials have chosen to combat a threatened recession by aggressively cutting interest rates, believing that they have room to do so because weak economic growth will keep a lid on prices.