Friday, October 14, 2005

Inflation is Here?

The Labor Department released the monthly Consumer Price Index numbers this morning, and things are not looking good for the economy following Hurricane Katrina. A Washington Post article mentions that the CPI rose 1.2%, the largest monthly increase since March of 1980, and that the 12-month increase is now 4.7%, the largest yearly increase since May of '91.

Further compounding the problem is the real earnings outlook (earnings minus inflation). Assuming a 1.2% increase in inflation over the past month coinciding with the CPI, earnings remained stagnant and as a result, purchasing power for earners fell with the price increase.

This is only a bulletin, I will get more information after class and write a nice post discussing the potential causes and long-term effects of these numbers. Stay tuned...

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