Rising prices threaten growth

Commentary: Inflation fears build support for spending cuts

By Lou Barnes, Friday, February 18, 2011.

Inman News™

Flickr photo by Jen Maloney.

Long-term Treasury rates, the bellwether for everything — recovery, inflation, recession, fear, joy — have stopped rising in the last two weeks, and even improved a bit and helped mortgages.

Interpreting markets is hard these days. The deafening financial-market chant — "recovery, inflation, recovery, commodities, recovery, sustained recovery" — makes it hard to concentrate. Maybe we could set the whole thing to music and hire the Super Bowl babe to sing the wrong words.

Many think that Middle East unrest has held rates down, but thus far it’s small-potatoes unrest. A more likely cause: Inbound data do not support acceleration of the U.S. economy. Retail sales numbers came in at half of forecast, industrial production is flat, and mortgage applications have fallen to near-record lows.

Global food and commodity prices are rising, igniting inflation fear among those who have worried about inflation ever since it broke in 1981, never to return. These price rises are cost increases that are likely to slow the U.S. economy, as there is no wage growth with which to pay them, or to pull into broad-gauge inflation.

more…

To continue reading sign in to your Premium Member account.

Premium Members have full access to all news archives.

Buy Now Purchase 1-year Premium Membership – $149.95

Copyright 2011 Lou Barnes

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.

• Comments
• Email
• Reprint Rights
• Community Guidelines

• Tweet This

    Tweet This Page

•   Facebook

•   LinkedIn

•  Digg This