Wednesday, March 21, 2007

Macroeconomic article and abstract

Gasoline and food prices push inflation upward
Associated Press
WASHINGTON (AP) - Consumers paid more for energy, food and a host of other items in February as a sluggish economy failed to extinguish inflation pressures. But in a hopeful sign for growth, factory output posted a better-than-expected increase.
The Labor Department reported Friday that the Consumer Price Index rose by 0.4 percent last month, double the January increase, as energy prices shot up and adverse winter weather in Florida and California sent citrus prices soaring.
The increase was larger than the 0.3 percent rise analysts had expected, although core inflation, which excludes food and energy, rose by just 0.2 percent, in line with forecasts.
But even there, economists saw problems with widespread increases in a number of categories including clothing, housing, education and medical care.
"Underlying inflation remains stubbornly above the Federal Reserve's target and these inflation figures put the Fed in a bind," said Mark Zandi, chief economist at Moody's Economy.com.
The Fed, which meets next Tuesday and Wednesday, would like to cut interest rates to give the sluggish economy a boost, analysts said, but the central bank cannot do so because of the stubborn persistence of inflation pressures.
On Wall Street, the Dow Jones industrial average fell 49.27 points to close at 12,110.41 as the inflation report deflated hopes that the Fed would start moving toward an interest rate cut when policy-makers meet next week.
In a separate report, output at the nation's factories, mines and utilities increased by 1 percent in February, led by a 6.7 percent surge in production of electricity and natural gas. The Fed report said this was the largest gain in utility output in 17 years and reflected colder-than-usual weather in February.
Manufacturing, which makes up fourth-fifths of industrial output, also showed strength, rising by 0.4 percent, only the second increase in the past five months, a period when factories have been caught in the downdraft from weakness in housing and autos.
Auto production was up 3.2 percent, helped by an increase in light trucks, a sign that automakers may be getting control of their bulging inventories of unsold cars.
"The rise in industrial production is very good news after all the downbeat data in the past two weeks," said Nariman Behravesh, chief economist at Global Insight, another private forecasting firm.
But other economists said it may take several months to reduce the backlog of unsold goods, particularly in industries supplying the slumping housing sector.
http://www.wiscnews.com/bdc/business/124768#

Abstract:
As consumers have shown to be paying more for their purchases, inflation continues. However, the factory output shows a “better-than expected” increase recognizing the increase in inflation as a good sign of growth. Statistics show the the Consumer Price Index has rosed by 0.4% last month, much larger than expected however, it is also stated that core inflations only rose by 0.2%. Analysts said that the Federal reserves is targeting to cut interests rates to give a boost in the economy but the central banks is unable to participate due to inflation pressures. Another report states that output at the nation’s factories, mines and utilities increased led by a great increase in the production of electricity and natural gas. Some economists think that the rise in industrial production is very good after all the downbeat data in the past two weeks while others worries about the backlog of unsold goods.

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