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Politics : Idea Of The Day
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To: WTMHouston who wrote (31444)5/15/2000 2:36:00 PM
From: Lee  Read Replies (2) of 50167
 
WTMHouston,..Re:.What happens though when companies say "we are not slowing anything down, we will just raise prices to offset the higher interest costs"

There is evidence that some are now able to increase prices. In the guts of the NAPM and Regional Fed reports is evidence that manufacturer's have been paying higher prices for crude goods for some months now. They are also recently receiving higher prices for product.

Re:.and in a tight labor market consumers say "if our interest expense is going up, we NEED to demand more money from our employers, which we can do given the tight labor market.

There is evidence this is happening. Look at the most recent ECI shown below.
stls.frb.org

But there is also evidence that higher productivity has allowed for some moderation of accelerating costs as Ike's post points out.

Finally, if we believe the statistics which state that only approximately 50% of the population has money in the market yet the GDP part of growth due to the consumer is 68%, then we would guess that what is fueling demand is NOT entirely due to those spending big market gains but those that spend daily at K Mart and KFC. The unemployment rate has a far bigger affect on spending than do market gains.

Cheers,

Lee
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