WASHINGTON, Jan. 16, 2008
Inflation Hits 17-Year High
Prices For Food And Energy Rise By Largest Amount Since 1990
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(AP/PHOTODISC/CBS)
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
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Interactive Inside The Fed A history of the Federal Reserve, glossary of terms and a look at changing interest rates.
The Labor Department reported that consumer prices rose by 4.1 percent for all of 2007, up sharply from a 2.5 percent increase in 2006. Both energy and food prices jumped by the largest amount since 1990.
Prices were also up sharply for health care, housing and education. However, these gains were offset somewhat by falling prices for clothing, new cars and computers.
Workers' wages failed to keep up with the higher inflation. Average weekly earnings, after adjusting for inflation, dropped by 0.9 percent in 2007, the fourth decline in the past five years. The lagging wage gains are cited as a chief reason many workers have growing anxiety about their economic futures.
Core inflation, which excludes both energy and food, rose 2.4 percent last year, slightly lower than the 2.6 percent increase of 2006. It is the performance of core inflation that the Fed closely monitors.
Analysts said the slight drop in core inflation for 2007 plus various reports showing the economy is in the grips of a serious slowdown will convince the central bank that a key interest rate it controls should be reduced by a bold half-point when Fed officials next meet on Jan. 30-31.
"Price pressures may be a little greater than the Fed would like but with the economy hitting the skids, inflation is not so high to stand in the way of aggressive action," predicted Joel Naroff, chief economist at Naroff Economic Advisers.
Providing further evidence of a slowing economy, the Fed reported that output at the nation's factories was flat in December, the worst showing since an outright decline of 0.5 percent in October. Economists said that poor reading confirmed their view that the manufacturing sector has slipped into a recession.
In a separate report, the Fed said its latest survey of economic conditions around the country showed the economy was losing momentum heading into 2008 although seven of the 12 Fed regions did report slight increases in activity.
The mounting signs of economic weakness have greatly raised concerns that the economy could be slipping into a recession. Unemployment jumped from 4.7 percent in November to 5 percent in December, the biggest one-month increase since the aftermath of the 2001 terrorist attacks. Many of the nation's biggest financial institutions have been reporting billions of dollars in losses, reflecting the meltdown in the subprime mortgage market that was triggered by a two-year long slump in housing.
The December weakness in industrial production reflected flat output at U.S. factories. For the year, output at auto plants fell by 4.1 percent as Detroit continues to struggle with falling demand in the face of soaring gasoline prices. Industries connected to the troubled housing sector including wood products and furniture also suffered big declines for the year.
"We believe that today's report confirms that manufacturing is in a recession," said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI. "General growth in exports and a few bright spots in aerospace, high tech and medical equipment cannot mitigate weak consumer spending and increasingly slow and cautious business investment activity."
For December, the Consumer Price Index rose by 0.3 percent, slower than the 0.8 percent jump in November, as food costs were flat for the month and energy prices rose by 0.9 percent after an even bigger 5.7 percent jump in November. Outside of food and energy, core inflation rose a more moderate 0.2 percent in December.
The rising risk of a recession has prompted politicians to consider stimulus packages to give the economy a jump-start to either prevent a recession or at least mitigate its fallout. President Bush has said he may unveil a plan around his Jan. 28 State of the Union address. Democrats in Congress and presidential candidates in both parties are putting forward their own plans.
The 4.1 percent increase in overall prices last year was the biggest since a 6.1 percent jump in prices in 1990.
Overall energy costs rose by 17.4 percent this past year while food costs rose by 4.9 percent. Both were the biggest increases since 1990. Gasoline prices were up 29.6 percent, the biggest increase since they soared by 30.1 percent in 1999.
© MVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
Add a Comment See all 42 Comments
- The only thing our goverment cares about concerning the middle class is how much we spend and who we vote for.
- Reply to this comment
- I think the American people have figured this little tidbit out without being told, CBS......
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Posted by veteran71 at 10:13 PM : Jan 16, 2008
+ report abuse
LOL Well according to some in the Race for President can not figure this all out.. Well those in the Republican Party anyway. They want to just keep on with the same Borrow and Spend we''ve lived through in the Bush Administration. They always PROMISE to get things straightened out but never do. - Reply to this comment
- By the way, who was president 17 years ago? Oh yea, George HW Bush. Just a coincidence?
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HAHAHAHAHAHAHAH - Reply to this comment
- (covers ear again) la la la la la la la
there is no such thing as inflation!!!
la la la la la la - Reply to this comment
- la la la la la
- Reply to this comment
- How can it hit a 17-year-high when inflation doesn''t even exist, and never has eixisted in the last 8 years?
Lies, lies, lies.
My sugar daddy Bush told me so. - Reply to this comment
- Inflation Hits 17-Year High
Prices For Food And Energy Rise By Largest Amount Since 1990
WELCOME TO THE BUSH BUBBLE, WHAT''S CHENEY UP TO?
BTW, KARL ROVE WAS GIVING THE GOP A LECTURE ON HOW TO BEAT THE DEMS IN THE COMING ELECTION.
HE EVEN HAD THE GULL TO TELL PEOPLE THEY CAN FIX THE ECONOMY.
IS THAT THE FUNNYEST P H U K ER IN THE WORLD.
WHEN ROVE STARTs WEARING HIS BOZO CLOWN SUIT IN PUBLIC THEN HE''LL GET MY RESPECT! - Reply to this comment
- Inflation Hits 17-Year High
Prices For Food And Energy Rise By Largest Amount Since 1990
WELCOME TO THE BUSH BUBBLE, WHAT''S CHENEY UP? - Reply to this comment
- Greedy fatcats. While most of America tightens it''s belt, they are raising prices on EVERYTHING to maintain their profit margins. Buy only what you need, carpool, do not buy American. They will soon be picking up tuna, not steak. Then they will make things a little more affordable.
- Reply to this comment
- Haven''t workers'' wages actually declined? I know many whose has.
- Reply to this comment
- By the way, who was president 17 years ago? Oh yea, George HW Bush. Just a coincidence?
Posted by takebackus
Lol, no coincidence, junior is playing the same game daddy had played.
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Posted by mcv57 at 06:39 PM : Jan 16, 2008
+ report abuse
And junior isn''t smart enough to play his own game so he has to use his daddy''s past presidency to model his by. - Reply to this comment
- prices are high no doubt;but we live in the land of milk and honey so no tears for america,we are still far better off then most countries.
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Posted by joesrc1 at 06:58 PM : Jan 16, 2008
+ report abuse
Honey, the dang cow is dry! Our Commander in Chief is hiding the real cow from you until he can skip town. All that''s left is BUSHIT!!! - Reply to this comment
- prices are high no doubt;but we live in the land of milk and honey
Posted by joesrc1 at 06:58 PM : Jan 16, 2008
Have you seen the price of milk and honey these days? - Reply to this comment
- prices are high no doubt;but we live in the land of milk and honey so no tears for america,we are still far better off then most countries.
- Reply to this comment
- By the way, who was president 17 years ago? Oh yea, George HW Bush. Just a coincidence?
Posted by takebackus
Lol, no coincidence, junior is playing the same game daddy had played. - Reply to this comment
- Lets see if I got a handle on modern American Economics; The middle class needs to save more money for a rainy day while:
1. Making less with the service jobs that replaced our lost manufacturing jobs.
2. Paying more for essentials like Gas, food, heat, power, health care, education, etc.
3. Loosing homes through foreclosure from shady mortgages, job loss or catastrophic health care costs.
4. Loosing Pensions from employers going chapter 11.
With all of the above increasingly happening in America, our government is worried that the American masses may cause a recession because we are SPENDING LESS!!!
Posted by ianlou,
Excellent Point. The only reason the Bush administration has not made this a priority is because the middle class cannot afford to make political contributions to the GOP. - Reply to this comment
- You can all thank your current administration for imposing restricting tariffs or unreasonable import requirements on foreign food, services, drugs, raw materials and electronics.
They have granted a monopoly to big businesses that shop your jobs overseas to the cheapest bidder while charging you more for the cheaper product. - Reply to this comment
- name one constiutional rights you lost..................
Posted by libsluvsuvs at 04:33 PM : Jan 16, 2008
Habeas Corpus - Reply to this comment
- name one constiutional rights you lost..................
Posted by libsluvsuvs at 04:33 PM : Jan 16, 2008
Privacy - Reply to this comment
- "INFLATION HITS 17 YEAR HIGH"
By the way, who was president 17 years ago? Oh yea, George HW Bush. Just a coincidence? - Reply to this comment
The road ahead in Afghanistan, and the crucial decision Obama faces.
