Arab Today, arab today inflation slams consumers as us economy
Last Updated : GMT 18:03:54
Arab Today, arab today
Arab Today, arab today

Inflation slams consumers as US economy

Arab Today, arab today

Arab Today, arab today Inflation slams consumers as US economy

Washington - AFP

Inflation roared back in July at the fastest pace since March, squeezing consumers just as the economy appears to be veering toward recession, government data showed Thursday. The inflation numbers came amid a batch of worse-than-expected data on the jobs market, manufacturing and housing, and as US and European stocks markets plunged on rising recession fears. A sharp rebound in gasoline prices and continued increases in food prices drove last month\'s inflation surge, the Labor Department said Thursday. \"Once again, the consumer was pushed to the wall by rising retail costs,\" said Joel Naroff, chief economist at Naroff Economic Advisors. \"It\'s bad enough that workers are not getting any pay increases but the surge in retail prices is cutting into spendable income.\" While many economists and the Federal Reserve say they expect that higher food and energy prices will prove transitory, that offers cold comfort to Americans who nevertheless must find the money to pay them. On Main Street, the Labor Department\'s data showed, Americans faced broad price increases for food, gasoline, clothing and medical care as unemployment stood at a painfully high 9.1 percent. The consumer price index rose 0.5 percent in July, more than erasing June\'s 0.2 percent decline. The gasoline index bounced sharply higher from previous declines, surging 4.7 percent in July, and accounted for about half of the increase in the CPI. Food prices rose 0.4 percent, twice as fast as the prior month. It was the hottest headline inflation since March\'s 0.5 percent rise, but the core CPI, stripping out volatile food and energy prices, eased slightly to 0.2 percent. \"This is not welcome news for Fed officials who are trying to justify QE3,\" First Trust analysts said in a client note. The Fed pledged on August 9 to hold interest rates near zero for two more years to counter increased risks of a stall in the world\'s largest economy. The central bank offered no successor to the $600 billion \"QE2\" stimulus program that wound up in June, but said it was reviewing available tools to boost a slowing economy. Adding to the unease Thursday were numbers on unemployment, manufacturing and home sales. New unemployment insurance claims rose to 408,000 last week, according to the Labor Department, ending a brief respite below the 400,000 threshold in the troubled jobs market. \"This was a slightly larger increase than expected, a reminder that the labor market has yet to break into sustained improvement,\" said Sara Kline at Moody\'s Analytics. In the collapsed housing market, sales of previously owned homes fell sharply in July, by 3.5 percent from June, but were still higher than a year ago, according to the National Association of Realtors. There was more disturbing news about the manufacturing sector, which has weakened from its supporting role in the economic recovery. The Philadelphia Fed\'s manufacturing index plunged in August to a negative 30.7 from a positive 3.2 in July. The August 8-16 business survey in parts of Delaware, New Jersey and Pennsylvania overlapped \"a week of unusually high volatility in both domestic and international financial markets,\" the bank said. RDQ Economics described the Philadelphia report as \"shockingly weak\" and noted that \"you have to go back to the depths of the 2008/09 recession and financial crisis to see as weak a reading\". The data barrage came as financial markets slid after Wall Street investment bank Morgan Stanley warned that the United States and the eurozone are dangerously close to recession. \"The optimistic forecast is very bad. The pessimistic forecast is catastrophic,\" former Fed governor Laurence Meyer told CNBC television network.

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