Friday, June 15, 2007

New Economic Data

There was a lot of new economic data released today. The two most widely anticipated were the news releases on Consumer Prices and Industrial Production.

The first picture shown below sums up the story as far as consumer prices go. Energy prices have gone up a lot, so the overall CPI looks bad, rising at a 5.5% annualized rate over the past six months - the fastest rate of inflation since the oil-price spike in the fall of 2005, following hurricanes Ivan and Katrina. So far, that inflation has not fed through into faster inflation in non-energy products, but recent history suggests that we should probably expect an uptick in core inflation in coming months.

Industrial production data also tells a somewhat unsettling story, illustrated below.

Real output by US industry stagnated last fall, and has failed to resume regular growth since then. Over the past three months production has been growing at a meager 0.6% annualized rate; as a result, capacity utilization remains only moderate. That's good news for inflation pressures, but bad news for the job market and future business expansion.

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