CPI Shows Input-Cost Inflation Tempered By Overcapacity |
| Forbes - Jan 14, 2011 |
Overcapacity in the economy and commodity-price inflation seem to be the guiding forces behind Friday's consumer price report from the Bureau of Labor Statistics, as CPI gained 0.5% almost exclusively due to higher energy prices.
Even though CPI showed its largest increase in 18 months, the worrying fact is that the index was pushed up purely by energy prices, which hit both consumers and businesses. "The gasoline index rose sharply and accounted for about 80%" of the total increase. Food, the other highly cyclical and inflation-prone indicator, remained subdued, gaining only 0.1% from November.
Yahoo! BuzzCore CPI, which excludes both food and energy prices, ticked up 0.1% from November and 0.8% for the year, reaching its lowest levels since the index's inception in 1958. "We are seeing an output gap based on overcapacity in the economy," explained Chad Cunningham, CIO for IronHorse Capital Management. "This has the potential to negatively affect margins, which are at historically high levels," he explained.
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- Posted: 2011-01-14 13:14:33
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