FacebookTwitterGoogle+RedditEmail

Recession Watch

Wednesday, the Labor Department will issue April data for the Consumer Price Index. The consensus forecast is for a 0.3 percent increase in the headline number and a 0.2 percent increase in the core index—the headline number with energy and food prices removed. My published forecasts are 0.5 and 0.2 percent in these two indicators of consumer inflation.

Rising gasoline, diesel and utilities prices are driving up consumer prices. The energy index should continue to increase through the summer, even as gasoline prices top out, because the full brunt of rising oil prices have not been felt by utilities—both electric and natural gas. Look for utilities to be asking regulatory commissions for large rate increases and for those to be reflected in consumer price data through the fall.

Meanwhile the wrongheaded ethanol program will continue to disrupt corn and grain markets at home and abroad causing shortages and rationing in developing countries and rising prices for grain derivative products—flour, baked goods, meat, dairy, and processed foods containing corn syrup and soy. The president’s proposals for non-food based ethanol derivatives are like General Motor’s ads about electric cars. Those benefits, if they ever arrive, are well into the future.

Look in the data for the following:

The energy index should rise 2 to 4.5 percent. According to the Department of Energy gasoline prices were up 6.1 percent in April, and gasoline prices are about half the energy price component. DOE and Labor Department data do not always coincide because of timing issues in monthly observations and the DOE publishes its readings much earlier.

Food prices are expected to rise 4 to 5 percent annually, thanks to the pass through effects of the ethanol program and rising demand for grains in China and other fast growing developing-country economies. Any reading less than 0.4 percent a month is good.

To dig deeper, look at Table 1 for the seasonally adjusted changes in cereals and bakery products; meats, poultry and eggs; and dairy. These categories provide some indication of the pass through effects of the ethanol program and higher energy prices generally. Also, those who watch travel and entertainment expenses from corporate perches, check out the data for “food away from home.” It provides an indication of cost pressures on restaurants. Restaurants are feeling all kinds of pressures but are inclined to blame food prices most of all.

The core index is expected to continue rising a bit more than 2 percent a year, and that comes to 0.2 percent a month. Federal Reserve Chairman Bernanke would like to see those prices rise less than 2 percent annually, but with so many pressures in global markets pushing up oil and other commodity pressures, that is a tough goal for U.S. monetary policy. U.S. interest rate policy will have virtually no impact on global oil, metal, cement, lumber and other commodity prices. Even the U.S. domestic natural gas market has been globalized by recent breakthroughs in the technology for shipping LNG and the build out of U.S. terminals. Homeowners heating with gas will enjoy a much smaller measure of insulation from surging global petroleum prices than in the past.

In Table 1, look for the moderating effects of slack demand on apparel and motor vehicle prices. However, pricing pressures will continue in health care and education—i.e., tuition, other school fees and childcare. Schools and universities will look to pare wage increases to accommodate rising utility costs but such efforts generally have limited effectiveness.

PETER MORICI is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.

 

 

 

 

 

 

 

More articles by:

PETER MORICI is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission.

Weekend Edition
July 20, 2018
Friday - Sunday
Paul Atwood
Peace or Armageddon: Take Your Pick
Paul Street
No Liberal Rallies Yet for the Children of Yemen
Nick Pemberton
The Bipartisan War on Central and South American Women
Jeffrey St. Clair
Roaming Charges: Are You Putin Me On?
Andrew Levine
Sovereignty: What Is It Good For? 
Brian Cloughley
The Trump/NATO Debacle and the Profit Motive
David Rosen
Trump’s Supreme Pick Escalates America’s War on Sex 
Melvin Goodman
Montenegro and the “Manchurian Candidate”
Salvador   Rangel
“These Are Not Our Kids”: The Racial Capitalism of Caging Children at the Border
Matthew Stevenson
Going Home Again to Trump’s America
Louis Proyect
Jeremy Corbyn, Bernie Sanders and the Dilemmas of the Left
Patrick Cockburn
Iraqi Protests: “Bad Government, Bad Roads, Bad Weather, Bad People”
Robert Fantina
Has It Really Come to This?
Russell Mokhiber
Kristin Lawless on the Corporate Takeover of the American Kitchen
John W. Whitehead
It’s All Fake: Reality TV That Masquerades as American Politics
Patrick Bobilin
In Your Period Piece, I Would be the Help
Ramzy Baroud
The Massacre of Inn Din: How Rohingya Are Lynched and Held Responsible
Robert Fisk
How Weapons Made in Bosnia Fueled Syria’s Bleak Civil War
Gary Leupp
Trump’s Helsinki Press Conference and Public Disgrace
Josh Hoxie
Our Missing $10 Trillion
Martha Rosenberg
Pharma “Screening” Is a Ploy to Seize More Patients
Basav Sen
Brett Kavanaugh Would be a Disaster for the Climate
David Lau
The Origins of Local AFT 4400: a Profile of Julie Olsen Edwards
Rohullah Naderi
The Elusive Pursuit of Peace by Afghanistan
Binoy Kampmark
Shaking Establishments: The Ocasio-Cortez Effect
John Laforge
18 Protesters Cut Into German Air Base to Protest US Nuclear Weapons Deployment
Christopher Brauchli
Trump and the Swedish Question
Chia-Chia Wang
Local Police Shouldn’t Collaborate With ICE
Paul Lyons
YouTube’s Content ID – A Case Study
Jill Richardson
Soon You Won’t be Able to Use Food Stamps at Farmers’ Markets, But That’s Not the Half of It
Kevin MacKay
Climate Change is Proving Worse Than We Imagined, So Why Aren’t We Confronting its Root Cause?
Thomas Knapp
Elections: More than Half of Americans Believe Fairy Tales are Real
Ralph Nader
Warner Slack—Doctor for the People Forever
Lee Ballinger
Soccer, Baseball and Immigration
Louis Yako
Celebrating the Wounds of Exile with Poetry
Ron Jacobs
Working Class Fiction—Not Just Surplus Value
Perry Hoberman
You Can’t Vote Out Fascism… You Have to Drive It From Power!
Robert Koehler
Guns and Racism, on the Rocks
Nyla Ali Khan
Kashmir: Implementation with Integrity and Will to Resolve
Justin Anderson
Elon Musk vs. the Media
Graham Peebles
A Time of Hope for Ethiopia
Kollibri terre Sonnenblume
Homophobia in the Service of Anti-Trumpism is Still Homophobic (Even When it’s the New York Times)
Martin Billheimer
Childhood, Ferocious Sleep
David Yearsley
The Glories of the Grammophone
Tom Clark
Gameplanning the Patriotic Retributive Attack on Montenegro
FacebookTwitterGoogle+RedditEmail