Wholesale Inflation Rate Soars

[marmar]

from AP, via Yahoo:



Wholesale Inflation Rate Soars



Tuesday, February 26, 2008
WASHINGTON - Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by rising costs for food, energy and medicine.

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.

The big jump in wholesale prices followed a worse-than-expected increase in consumer prices, which rose by 0.4 percent last month as consumers got hit by higher costs in the same areas of food, energy and health care.

The wholesale report said that energy prices jumped 1.5 percent, reflecting a 2.9 percent rise in gasoline and an even bigger 8.5 percent jump in the cost of home heating oil.

Food prices, which have been surging because of increased demand stemming from ethanol production, rose by 1.7 percent last month, the biggest monthly increase in three years. Prices for beef, bakery products and eggs were all up sharply. ......(more)

The complete piece is at: http://news.yahoo.com/s/ap/20080226/ap_on_go_ot/economy

[RedEarth]

1. Stagflation.... such a wonderful thing

I remember it well from the seventies....and it ain't pretty.

[HereSince1628]

3. Remember money markets earning 12-15% in the 80's?

This is gonna work out for those who won't be ruined first.

You just gotta wear asbestos underwear and kevlar sweaters, and not worry about the possibility that down the road this could mean mesothelioma.

[RedEarth]

5. Sure do

I was able to take some advantage of high rates then and buy some 15 year zero coupon bonds for my children's college education. Sort of rolling the dice, since at that time you didn't know for sure if rates were going to fall or go up...as it turned out, they did go down.

Now, it's a different story since rates are already so low and inflation is starting to really show it's ugly side(not, that it hadn't already). It goes without saying it puts the public in a bad spot, but it also puts the fed in a hard spot in trying to figure out what to do with rates. Plus there are so many different variables to the current downturn and no one is really sure how deep the credit crisis will go.

[HereSince1628]

2. Inflation of producer prices or devaluing of the US Dollar?

Seems that this can be viewed at least two-ways.

[ThomWV]

4. "Food prices .. have been surging because of ... ethanol production" Pure Horseshit

Food prices have not been surging because competition for agricultural land from ethanol producers, they have been surging because of the increased cost of every other input, fertilizer and fuel for farm machinery being chief among them but also the cost of acreage and increased taxation resulting from suburification of rural areas.

Don't blame it on the fools trying to make gas out of corn - they are wasting time and money, but they aren't driving up the price of a loaf of bread worth mentioning.

[DainBramaged]

6. Japan has yet to recover from stagflation, and the ethanol "problem" is horseshit

The "demand stemming from ethanol production" is complete horseshit. Only 10% of our fuel is ethanol (blended) and there are NO plans from any of the oil companies to make ethanol pumps widespread outside of the farm belt. At $250,000 cost for each tank and ONE pump, the return is hardly worth the effort. Maybe they should stop exporting so much corn out of the U.S. and pay attention to America.

It is a simple scam by the "board of Corporate America" to squeeze every penny out of the middle, excuse me, lower class of Americans before the Democratic takeover in 2009. Their goal is to make the hole they leave impossible to fill in four years. Burn and retreat.