Inflation up as U.S. economy slows down

[Neil D]

Markets bet Fed will stop raising rates

Businesses find it easier to boost prices

Jul. 29, 2006. 01:00 AM

NELL HENDERSON

SPECIAL TO THE STAR

WASHINGTON—U.S. economic growth slowed and inflation rose in the three months ending in June, the government reported yesterday, confirming earlier signs that consumers are hunkering down in response to higher energy prices and interest rates.

Businesses also spent less on home building and on equipment and software, while U.S. government spending dropped in the second quarter.

All totalled, the gross domestic product, which measures the value of all goods and services produced, rose at a below-average 2.5 per cent annual rate in the second quarter, a sharp drop from the rapid 5.6 per cent pace of the first quarter, the U.S. commerce department said.

Meanwhile, consumer prices shot up at a heated 4.1 per cent annual pace in the quarter according to the department's inflation measure. That was more than double the rate in the previous quarter, and matched the rate of the third quarter of last year, when energy prices rose after Hurricanes Katrina and Rita.

The inflation rate was much higher than the increase in workers' wages, salaries and benefits, according to the U.S. labour department's employment cost index, which was also released yesterday. The index rose 0.9 per cent in the last quarter, up from a 0.6 per cent increase in the first quarter. "It adds up to an economy heading into a fairly significant slowdown," said Nariman Behravesh, chief economist for Global Insight, a financial analysis firm.

Stocks and bonds rallied, however, on speculation that Federal Reserve policy-makers would soon stop raising interest rates after two years of steady hikes.

Inflation on the rise

[Dr. Shane]

High fuel prices are taking their toll. Unfortunately Congress is about to raise the minimum wage because it is an election year. That should have been done two years ago when the economy was booming. Now it will only hurt the economy further.

[Neil D]

Ed Shultz show

This takes awhile to load, but well worth the listen if you have speakers on your computer and the accompanying software like Quicktime, ect. According to Ed Shultz, an email comes in complaining about gas prices and oil companys making $10 Billion in profits [specifically Exxon making $10 Billion this quarter alone], while this small business owner, specifically a trucker, watches his expenses go up 42% and he has to let his drivers go due to the costs...And Bush says that small business owners are the backbone of american economics.... <img src="/adventist/images/graemlins/thats-funny.gif" alt="" />

[olger]

Fuel prices do take a toll on small business, but we must pass the cost increase on to our customers.

olger