WASHINGTON, Aug. 14, 2008
Consumer Prices Twice As High As Expected
Fed Faces Tough Decision On Interest Rates As Inflation Posts Biggest 12-Month Gain Since 1991
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(AP/CBS)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.
It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June. And it leaves inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991.
Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.
The inflation surge presents a major problem for the Federal Reserve: Will inflation force it to start raising interest rates even as the economy struggles to avoid a recession?
The big rise in inflation left consumers even more squeezed. The Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990.
The Labor Department also reported that the number of newly laid off workers filing for unemployment benefits fell by 10,000 last week to 450,000. The decline was less than expected and showed the labor market remains under severe stress from the weak economy. The four-week average for claims rose to the highest level in six years.
On Wall Street, stock futures took a tumble after the report on worries about inflation.
The 0.8 percent rise in consumer prices reflected big increases for energy and food, a pattern that has been happening for months.
Energy prices jumped by 4 percent last month, driven upward by a 4.1 percent rise in gasoline prices. In July prices at the pump were 37.9 percent above where they were a year ago.
There could be some relief on the way, however, as gasoline prices, after hitting a record at $4.11 per gallon in mid-July, have been falling in recent weeks. They now average nationwide around $3.79 per gallon, according to the survey by auto club AAA and the Oil Price Information Service.
Crude oil prices are also down about $30 per barrel from a peak in early July and analysts are hoping that this decline will help relieve some of the pressures on energy costs.
Food costs shot up by 0.9 percent in July, reflecting higher costs for a wide variety of food products. Over the past 12 months, food prices have risen by 6 percent, reflecting surging commodity prices. The Agriculture Department reported this week that this year's corn and soybean harvests will be among the largest in history, though, easing fears that had been fueled after heavy flooding in the Midwest in June.
The core inflation figure was driven higher by a big 1.2 percent jump in clothing costs, the biggest increase in this area since August 1998. Airline ticket prices, which have been surging because of higher fuel costs, jumped another 1.3 percent in July.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 54 CommentsPosted by Bob5ford
Wages should never go up, they should always go down. This is one of the core principles of neo-conservative Republican thinking.
My question to you is:
Which Party did you vote for?
[Posted by mjvw2 at 08:01 AM : Aug 15, 2008]
so you have ten people working for you that could be done by seven? then why do you have ten?
you won''t be able to extract much more from the remaining seven if they are fully utilized. you''ll have less output ... which will produce less income ... which will affect you.
and if you do manage to drive them harder for the same wage ... they''ll be distant memories as soon as the market opens up and they can find a job elsewhere where they''re not overworked.
if your business requires no continuity in your workforce ... or has ''no-skill'' workers doing the tasks ... you''re stategy might work.
This jackazz has ruined our economy, guess he deserves a medal from the next repervican president.
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Posted by mjvw2 at 08:01 AM : Aug 15, 2008--
I concede the point that higher taxes would cause you to lay off people but your recession/depression will get worse because of "demand" evaporating. Thus eventually you will go out of business. It''s a vicious cycle.
But there''s no comparison of someone who doesn''t make enough to buy groceries on a salary eaten up by inflation and just holding out for welfare where you still pay the taxes for. That''s the price you pay for this 100 year Iraq war nonsense!
Either you pay through inflation or you pay taxes when it comes to backing up the fiat currency known as the "dollar". You have no choice except to go back to the "gold standard".
However the real solution is to "end the war in Iraq NOW".
Posted by laborsvoice at 02:55 AM : Aug 15, 2008
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You''re really a pretty nice guy! Most people I know would start with a good caning, waterboarding, a beating, tar ''n feathering, and THEN things would get ugly!
Republican''s your butts are mud in November. We have had enough and won''t take any more. You best move to Dubai with Dubya and crew.
Posted by bobbyduck1 at 10:53 AM
Don''t count on it. The ignorance and bigotry of the right wing racist elitists is absolutely astounding.
You can count on a Bu$h to make inflation shoot up.
Vote Obama.
If you make more than $250,000/year, you will pay more in taxes (as you should). If you make less than $250,000 you will pay less.
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See all 54 Comments