No surprises here really, but the don't the media sounds surprised?? The funny (scary) thing is that the spending hasn't even really started yet and CPI is above 4% I don't think the Jeanie will be going back into the bottle any time soon ....
CPI Rises Despite U.S. Recession
Lisa LaMotta, 03.18.09, 02:20 PM EDT
Higher-than-expected increase raises questions about future inflationary pressures.
The U. S. economy continues to falter as companies cut back, countless Americans lose their jobs and the markets continue to be erratic, but somehow, consumer prices are rising.
The Labor Department reported Wednesday morning that the Consumer Price Index, a key indicator of inflation, rose by 0.4% in February over the prior month. Increases in energy prices were only partially offset by a drop in food costs. Economists surveyed by Thomson Reuters had expected that consumer inflation would increase a bit more moderately, by 0.3% for February--matching the 0.3% rise in January. (See "CPI Inches Higher In January.")
Some analysts would have you believe that the slight uptick in recent months of the CPI means that America has avoided the dreaded threat of deflation, but Peter Schiff of Euro Pacific Capital -- who has been bearish on U.S. economic prospects for years -- said he believes the increase is a sign that something worse is yet to come.
Schiff points back to the time of the Great Depression and asked, "How much worse would it have been if prices had been rising?" We may just find out, as the U.S. crawls deeper into one of the worst recessions in more than half a century. Schiff said temporary factors like the rising dollar have been holding inflation down, but added that the counterbalance of the government stimulus programs means inflation is going to skyrocket once the dollar loses ground -- making things like food and gas unaffordable to the average American, especially those out of work.
"This shows some massive inflationary pressures beneath the surface," said Schiff. "Prices should really be falling right now. That would actually be healthy. If you think about all the income people are losing -- what's happening to people's wealth, their home equity, their stock-market portfolio -- if at least this was being offset by a fall in the cost of living it wouldn't be as painful. Consumer prices are supposed to fall in correlations with a loss in income and assets. "
The energy component of the CPI rose by 3.3% in February, following a 1.7% pickup in the month prior, while the gasoline index rose by 8.3% last month. In contrast, the indexes for fuel oil and natural gas both declined in February and are well off their highs from last July--the gasoline index is down by 44.0% from its peak.
Meanwhile, the food and beverages index declined by 0.1% in February; and the food-at-home index, which includes prices for the major grocery store food groups such dairy and meat, fell by 0.4%.
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Apparel prices jumped by 1.3%, the biggest rise since a 1.5% gain in March 1990; housing prices were flat.
The CPI measures the average change over time in prices of goods and services for approximately 87.0% of the U.S. population, including wage earners, clerical workers, professional/managerial/technical workers, the self-employed, short-term workers, the unemployed and retirees.
Core inflation, which excludes volatile food and energy costs, was expected to show a 0.1% rise in February but in fact notched a 0.2% increase.
Inflationary pressures have been virtually absent over the past six months, as markets have trended downward, giving the Federal Reserve he leeway to lower interest rates to nearly zero. The slight increases over the past two months have calmed fears of deflation, a prolonged bout of falling prices.
http://www.forbes.com/2009/03/18/consum ... ssion.html
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