Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

U.S. Consumers Continue to Struggle as Inflation Accelerates

Economics / Inflation May 17, 2011 - 01:19 PM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleKerri Shannon writes: The accelerating U.S. inflation rate reached its fastest pace in two and a half years last month as consumers continue dealing with higher food and energy prices.

The consumer price index (CPI) in April rose 3.2% over the last 12 months, the biggest yearly jump since October 2008. That's up from a yearly jump of 2.7% in March and 2.1% in February. The CPI in April increased 0.4% from the previous month.


The U.S. Labor Department reported Friday that rising energy prices contributed to more than half of the increase. Gasoline prices soared 3.3% in April and 33.1% over the past year.

Food prices have climbed 3.2% over the past year and were up 0.4% in April. A decline in fresh vegetable prices stunted food-price growth, which previously rose 0.8% in March.

Core inflation - which excludes volatile food and energy prices - was up 0.2% in April and 1.3% from a year earlier. The U.S. Federal Reserve uses core inflation to gauge consumer costs, and the Fed is unlikely to adjust interest rates or quantitative easing measures as long as core inflation remains under its unofficial 2% target.

"On the core side it is a slow drift, but it is nonetheless there," Joshua Shapiro, chief U.S. economist at MFR Inc., told The New York Times. "What will be important to the Fed is the mix between inflation and real growth."

The core index has risen by 0.2% three times in the last four months, pushed up by rising prices for new vehicles, shelter, medical care and airline tickets.

U.S. Federal Reserve Chairman Ben Bernanke said at a press conference the central bank still thinks inflation is transitory, and it expects rising prices to start to cool this year.

In economic projections released at the conference, the Fed raised its inflation outlook to 2.1% to 2.8% in 2011 from its January predictions of 1.3% to 1.7%. It expects inflation to fall to 1.2% to 2.0% in 2012, and to remain at 1.4% to 2.0% in 2013.

"[Inflation] is still not of concern to the Fed," Stuart Hoffman, chief economist at the PNC Financial Services Group, told The Times. "We are sort of in the middle, not going up too fast to worry the Fed about inflation."

Some economists think gasoline prices are almost done their climb and consumers will soon feel relief.

"I don't see inflation as running at high enough levels to threaten the recovery, especially now that we're seeing signs that gasoline prices have peaked," David Resler, chief economist at Nomura Securities, told CNNMoney. "If that proves to be the case, we can all breathe a little easier."

A survey by The Wall Street Journal asked 55 economists their views on the U.S. inflation rate, and many agreed with the Fed's position that higher prices are nearing their peak.

The majority of economists surveyed said they expected inflation to moderate over the next year, slowing to 3% by the end of 2011 and below 2.5% in 2012. They expect food and energy prices to gain but at a much slower rate than they did at the beginning of this year.

"For energy prices to affect the rate of inflation over the next four years to the same extent - they rose at around 25% or so last year - they would have to keep rising at 25% per year for the next three or four years," said Federal Reserve Bank of Minneapolis President Narayana Kocherlakota. "I don't believe that's going to happen."

But U.S. consumers are not convinced that rising prices will subside, as they continue to fork over more money at the gas pump and grocery store. The average price of a gallon of regular gasoline hit $3.955 yesterday (Monday), up about 30% this year.

To compensate, many households are driving less, shopping less, and brown-bagging their lunch more often to budget in higher costs.

"Consumers are spending more, but it's getting soaked up in higher gas prices and higher food prices," John Ryding, chief economist at RDQ Economics, told The Times. "That's not leaving nearly as much left over for discretionary spending."

The strain on household budgets is a major concern since consumer spending makes up 70% of U.S. economic activity. The U.S. recovery has shown signs of stalling as gross domestic product (GDP) growth slowed in 2011's first quarter to 1.8%, down from 3.1% at the end of 2010.

U.S. households' budget struggles have led many to doubt the Fed's take on the U.S. inflation rate, especially with Bernanke's claim that rising prices are "well anchored."

"Last time I checked, inflation costs were anything but well anchored and companies are, in fact, passing along costs as fast as they can," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "McDonald's Corp. (NYSE: MCD), Nestle SA, and Wal-Mart Stores Inc. (NYSE: WMT) are just a few of the companies that have spoken out about the specific impact that higher component and ingredient costs have had on their earnings. Many have adjusted their guidance."

Kimberly-Clark Corp. (NYSE: KMB) recently announced price hikes of 3% to 7% for certain petroleum-based products, and The Procter & Gamble Co. (NYSE: PG) said it would raise prices on some items by 5%. Apparel makers like Hanesbrands Inc. (NYSE: HBI) and Nike Inc. (NYSE: NKE) also said they have started raising prices due to higher costs of oil and cotton.

Source :http://moneymorning.com/2011/05/17/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

John Dunham
18 May 11, 09:29
Do Fed Members Even Think About What They Say

Now I have seen everything. According to Federal Reserve Bank of Minneapolis President Narayana Kocherlakota we do not need to worry about inflation because "For energy prices to affect the rate of inflation over the next four years to the same extent they would have to keep rising at 25% per year for the next three or four years." Sure, for energy prices. But housing costs represent about a third of the CPI and they have been falling. Katie-bar-the-door when housing costs start rising again!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules