Friday, August 13, 2010

Economic Dog Days of Summer

Two key economic indicators out this morning show a tepid economy that really isn’t growing, but really isn’t shrinking, either.  It’s basically dragging along, staying just above a floor it hit in late summer of 2008, the deepest  trough of the recession.


Consumer prices rose just 0.3 percent last month, after falling 0.1 percent in June.  The Reuters story typically tries to put a positive spin on the numbers, noting that it was the first increase in four months and eases concerns over deflation (a period of a sustained decrease in the general price level).  The truth is, such a small change gives neither deflationists nor bulls much to cheer or sigh in relief over. 


imageIn the other release this morning, the Department of Commerce reported that business inventories grew to their highest levels in a year in June.  Inventories rise when companies restock after a period of inventory reductions caused by sour economic conditions, or when companies expecting an increase in demand stock up.  The latter case applies here, as the report also showed business sales falling and the inventory-to-sales ratio increasing.  

Prices are flat, and have changed only 1.2% year-over-year.  Flat consumer prices indicate flat consumer demand, and that’s showing up in inventories and business sales data.  It’s not a cheery signal in an economy where consumer spending drives two-thirds of total output.  But the slight increase in consumer prices is no reason to cheer the Summer of Recovery.  These are the Dog Days of Summer.


Post a Comment

You must have a Google Account to post a comment.

WARNING: Posting on this blog is a privilege. You have no First Amendment rights here. I am the sole, supreme and benevolent dictator. This blog commenting system also has a patented Dumbass Detector. Don't set it off.

Note: Only a member of this blog may post a comment.