Do the grim economic reports point the U.S. economy towards stagflation? The markets seem to be shaking them off...
Today the producer price index (PPI) monthly report showed that producer price inflation surging in January to 1.0%, and that the core rate, also firmed at 0.4%.
The year-over-year PPI is at 7.7%, up from 6.5% in December, and is at the highest rate since September 1981.
-However, the Core CPI and PPI which exclude volatile food and energy costs, are still relatively tame in comparison to the highs seen in the late 70s and early 80s
Do the grim economic reports point the U.S. economy towards stagflation? The markets seem to be shaking them off...
Today the producer price index (PPI) monthly report showed that producer price inflation surging in January to 1.0%, and that the core rate, also firmed at 0.4%.
The year-over-year PPI is at 7.7%, up from 6.5% in December, and is at the highest rate since September 1981.
-However, the Core CPI and PPI which exclude volatile food and energy costs, are still relatively tame in comparison to the highs seen in the late 70s and early 80s
Consumer confidence also plunged in February, down to a reading of 75.0 from a revised 87.3 in January with Americans concerned about "less-favorable" business conditions and job prospects.
Do the grim economic reports point the U.S. economy towards stagflation? The markets seem to be shaking them off...
Today the producer price index (PPI) monthly report showed that producer price inflation surging in January to 1.0%, and that the core rate, also firmed at 0.4%.
The year-over-year PPI is at 7.7%, up from 6.5% in December, and is at the highest rate since September 1981.
-However, the Core CPI and PPI which exclude volatile food and energy costs, are still relatively tame in comparison to the highs seen in the late 70s and early 80s
Steve Liesman, our Senior Economics Reporter, has looked at the specter of stagflation, where the economy weakens amid rising costs. He reported that the National Association for Business Economics sees growth slowing to a crawl in 2008 and bouncing back in 2009.
The 49 economists surveyed have raised the odds on recession, however, more than half hold out hope that the economy will avoid a recession.
As Steve notes, we have been in this place before.
-The PPI report this morning, combined with the hot CPI report last week, rising 0.4% in January, and 4.3% year-over-year, and the decline in housing starts point towards stagflation. In addition on Tuesday, the S&P Case-Shiller home pricing index fell 8.9% in 2007, the largest decline in 20 years.
Steve sums up: Will the economy respond differently this time? Some argue that soaring food, energy and import prices make stagflation the real thing. Others say this movement is part of the normal ebb and flow, as inflation rises, the economy slows and stagflation concerns are part of the normal refrain.
-The Misery Index tracks inflation as measured by the CPI, and the rise in unemployment. At its height it implies that the combination of rising inflation and job loss point towards a deterioration in the economy. And as you can see by the chart of the Misery Index below, we have not begun to reach the levels seen in the late 1970s and early 80s, mostly due to the fact that U.S. employment growth has been strong, and inflation modest, but the index is beginning to creep up.
Do the grim economic reports point the U.S. economy towards stagflation? The markets seem to be shaking them off...
Today the producer price index (PPI) monthly report showed that producer price inflation surging in January to 1.0%, and that the core rate, also firmed at 0.4%.
The year-over-year PPI is at 7.7%, up from 6.5% in December, and is at the highest rate since September 1981.
-However, the Core CPI and PPI which exclude volatile food and energy costs, are still relatively tame in comparison to the highs seen in the late 70s and early 80s
