Tags: michael | carr | Data | take | Air | Out | Inflation

Other Data Take the Air Out of Inflation Fears

By    |   Friday, 15 Jul 2011 12:51 PM

Bureau of Labor Statistics data shows that in June, inflation declined by 0.2 percent, as measured by the Consumer Price Index. This follows a 0.2 percent increase in May.

Economists surveyed by Bloomberg had expected prices to fall 0.1 percent, once again missing the mark with their forecasts.

Economists fared little better forecasting the core CPI, which excludes volatile food and energy prices. This measure jumped 0.3 percent, beating their expectations of a 0.2 percent gain.

Core CPI is generally considered to be a better gauge of inflation by economists. The large increase, which was similar to the gain seen in May, has economists worrying that inflation is returning.

Another report that was released at about the same time garnered fewer headlines but shows inflation is unlikely. Capacity utilization was reported by the Federal Reserve to be at 76.7 percent.

Once again, the economists surveyed before the report were off a little. They had been looking for an increase to 76.9 percent.

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(Getty Images photo)
This indicator measures how much of the nation’s industrial base is being used, and it indicates almost a quarter of factories, mines, warehouse space, and other facilities are sitting idle.

Capacity utilization was unchanged from May, which shows that factories aren't expanding. Output is up, as measured by the Fed, which indicates businesses are using the same amount of resources to produce more goods.

Economists were wrong across the board with their forecasts before the reports were released. There is little chance that they will suddenly be right as they analyze the actual reports.

Until businesses are forced to use to more resources, there shouldn’t be much upward pressure on prices. Capacity utilization is an early warning sign of inflation, and this report shows economic growth is still being driven by productivity gains rather than expansion.

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Bureau of Labor Statistics data shows that in June, inflation declined by 0.2 percent, as measured by the Consumer Price Index. This follows a 0.2 percent increase in May. Economists surveyed by Bloomberg had expected prices to fall 0.1 percent, once again missing the...
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Friday, 15 Jul 2011 12:51 PM
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