Little Sign of Inflation on the Horizon

ConsumerAffairs.com

July 15, 2009
Outside of energy, consumer prices show little sign of inflation in June, and even gasoline prices started going down by the end of the month.

The Labor Department reports the "core" Consumer Price Index was up 1.7 percent over June 2008 and up a miniscule 0.2 percent from the month before. The numbers calmed persistent Wall Street fears that massive government spending would unleash massive inflation. While experts say inflation may eventually become a problem, there's little evidence of it now.

"Gasoline prices skyrocketed, as anyone who fills up knows, and fuel oil was up sharply as well. But otherwise, households didn?t face a whole lot of price pressures," said Joel Naroff, chief economist at Naroff Economic Advisors, in Holland, Pa. "Food costs were stable and housing was under control."

The report also showed medical costs were up only modestly and communications costs fell. Recreation costs increased more than usual.

Apparel prices oddly jumped, Naroff said. "The cost of women's and infants clothes surged."

Naroff said he didn't think the hike in clothing costs is a trend, just part of the ups and downs of those products. Measured over 12 month, clothing costs are down two percent.

"Investors should like this report as it basically says the Fed is free to do what it has to in order to get the economy going faster," Naroff said. "It also doesn't push up the time when the Fed will have to start tightening. For now, inflation remains a non-issue."

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