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It's getting worse

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  • It's getting worse

    Wholesale inflation spikes higher
    Labor Department says prices, up a modest 0.2% in April, raced ahead in May at fastest pace in six months.
    Last Updated: June 17, 2008: 8:53 AM EDT

    WASHINGTON (AP) -- Wholesale prices bolted ahead in May at the fastest pace in six months as energy and food costs marched higher.

    The Labor Department reported Tuesday that its Producer Price Index, which measures the costs of goods before they reach store shelves, shot up 1.4% in May. That was up from a modest 0.2% rise in April and marked the biggest increase since November.

    However, stripping out energy and food prices, which can swing widely from month to month, the "core" rate of inflation rose 0.2% in May, an improvement from the prior month's 0.4% increase. That suggested that other prices were fairly well behaved.
    Prices match expectations

    The overall inflation rate of 1.4% was higher than the 1% rise many economists were forecasting. But the increase in core prices matched their expectations.

    Energy prices jumped 4.9% in May, also the biggest rise since November. Diesel fuel prices galloped by 11.2%, gasoline prices were up by 9.3% and home heating oil increased by 8%.

    Food prices also rose sharply. They increased by 0.8% in May, after being flat in April.

    In May prices for pork went up 8%, the most since September 1999. Prices for fruits and melons rose 5.9%, the most since December. Prices for beef and veal, natural cheese and certain confectionary goods also posted sizable increases.

    There are fears that eventually these energy and food costs will force companies to boost prices for lots of other goods and services, spreading inflation through the economy.

    Given those concerns, many economists believe the Federal Reserve will hold interest rates steady at 2%, a four-year low, when it meets next week.

    Fed Chairman Ben Bernanke and his colleagues have signaled that the Fed's rate-cutting campaign, started last September to shore up economic growth, was over because of growing concerns about inflation.

    Wall Street investors and some others predict the Fed will have to boost rates later this year to ward off an inflation flare-up. Others, however, believe the Fed will leave rates alone through the rest of this year. Raising rates too soon, they said, will hurt the fragile economy, which has pounded by housing, credit and financial problems.

    Soaring energy and food prices are walloping consumers and businesses alike.
    Workers' paychecks

    Last week, the government reported that consumer prices leaped by 0.6% in May, the biggest increase in six months. Those higher prices also are cutting into workers' paychecks -- further straining budgets.

    Businesses, meanwhile, also are tightening the belt. Employers have cut jobs every month so far this year. That's pushed the nation's unemployment rate up to 5.5% in May, from 5% in April -- the biggest one-month rise in two decades.

    Wholesale prices are rising faster than consumer prices because businesses -- for competitive or other reasons -- have been limited in their ability to pass along all of their higher costs from energy and other raw materials to customers.

    Elsewhere in the wholesale inflation report, prices for light trucks dipped 0.9% and prices for cars dropped 1%. Cigarette prices rose 2.5% and airplane prices increased 1.1%, the most since August 2004. To top of page
    First Published: June 17, 2008: 8:41 AM EDT

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  • #2
    Yup..... However. I think it will cycle like everything else in the world. The problem is the troughs of the cycle are consistently higher and higher every year. This my friends is called an "up trend". We will get some relief but I don't expect miracles. At this point $2.20 a gallon would cause people to sing in the streets..... Think relative. This is how we get hoodwinked into thinking things are better than they were... Well, relative to today sure, $2.20 seems like a bargain... relative to 2 years ago.... HOLY $#*$!! The strain on the middle class is astronomical. The poor do not get any poorer in reality, the rich typically get richer amazingly, and the middle class get shifted down a few pegs as a whole. Think relative again though.... The middle class EXPLODED during the last 5-10 years. Most of them came out of the real estate boom. Meaning... They didn't have the wherewithal to elevate themselves financially without taking part in the largest financial phenomenon this decade. Therefor, the financial skills such as budgeting, spending, saving, etc did not come along with the sums of money they were able to make. Think lottery winners. It's only natural that the middle class would have the greatest shake up. or shake down.. however you want to look at it.
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    • #3
      I could not agree more.

      I used to tell everyone i knew..

      Watch the fuel surges over the past 5-8 years.

      They raise them super high, people complain but get used to them then they lower it 30-50% of the sharp rise and everyone is happy, and just goes with the flow...


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