If there is a gauge to measure the need for both greater increases in fiscal and monetary stimulus, this is as good as any. This stagnation in prices signal a significant demand deficiency that can only be alleviated by increases in business spending (the first step would be increased capital investment). With US businesses sitting on more than $1.5 trillion in cash, we can accurately state that they do not view consumer demand to be significant enough to warrant expansion.
The consumer price index increased 0.3% in August, led by higher energy and shelter costs, the Labor Department said Friday. The increase matched expectations. However, core prices -- which exclude volatile food and energy costs -- were flat, below the 0.1% gain expected by economists surveyed by MarketWatch. See calendar of major U.S. indicators with forecasts........................
In the past year, the CPI has risen 1.1% -- and at a 0.6% annual rate so far in 2010. The core CPI has risen 0.9%, the same rate over the past five months, and under of the 1.7%-to-2% comfort zone that Fed officials have talked about. The core CPI has risen at a 0.7% annualized pace so far in 2010.
ďA dip below 1% shows that the economy is just one modest contraction away from dipping into a Japanese like deflation,Ē said Steven Ricchiuto, chief economist at Mizuho Securities USA, of the core inflation rate.
In a release from BLS.gov:The index for all items less food and energy was unchanged in August
after rising 0.1 percent in July. The shelter index, which rose 0.1
percent in each of the previous three months, was unchanged in
August, as was the index for household furnishings and operations.
Within the shelter component, the index for rent declined 0.1
percent, its first decline since November of last year. The index for
owners' equivalent rent was unchanged and the lodging away from home
index fell 1.3 percent. The index for medical care rose 0.2 percent
following a 0.1 percent decline in July, with both the medical care
commodities index and the medical care services index rising 0.2
percent. The index for hospital services rose 0.5 percent in August
after a 0.5 percent decline in July. The index for used cars and
trucks continued to increase, rising 0.7 percent in August, and the
index for new vehicles rose 0.3 percent. In contrast to these
increases, the recreation index continued to decline, falling 0.2
percent after a 0.1 percent decrease in July. The apparel index
turned down in August, falling 0.1 percent after rising in each of
the three previous months.