Funny WSJ piece:
Core Constituency
March 17, 2004
AHEAD OF THE TAPE By JESSE EISINGER
Ignore the price of your house, your gasoline, your health care,
your food, your business's raw materials, your insurance and
whatever else is rising. The government says there is no inflation
here. Move on, folks. Nothing to see.
The government is likely to say that again Wednesday when it reports
the consumer-price index, a day after the bond market interpreted
the Federal Reserve's statement as reiterating that it wouldn't be
raising rates any time soon. The Fed statement said, essentially,
that the economy was strong but that the labor market was struggling
while its beloved "core" consumer prices, apparently excluding
things that go up, remain muted.
Prices to businesses, however -- at least those measured by the
producer-price inflation -- would appear to be rising strongly.
Commodity and raw-material prices, such as steel, have been
skyrocketing. The PPI data, one would think, would show big jumps --
but they aren't. This is because the government has yet to issue the
numbers. The PPI data have been delayed for two months, as the
Bureau of Labor Statistics struggles with a facelift and tummy-tuck
to the numbers.
"I wonder if the 21,000 jobs [created in February, according to the
job report] was the new fleet of number-massagers for the BLS," says
Stephanie Pomboy of consulting firm MacroMavens.
Those poor government economists. They feel the full brunt of the
conspiracy theorists who think the official data are being worked
over in order not to show that prices are rising at an unsustainable
clip. The Fed can't raise interest rates without a clear improvement
in the labor market, primarily because some consumers have piled on
so much debt that they would crack under the strain of higher
interest rates.
Meanwhile, more signs are showing that inflation might be coming.
Thanks to the weak dollar, import prices in October started rising
faster than consumer prices. This could start to protect U.S.
companies and give them a modicum of pricing power.
The problem is that other indicators are suspicious. Has the bond
market been rallying because the economy is weakening or thanks to
technical factors and such events as interventions by the Japanese
central bank to keep a lid on the dollar?
Ms. Pomboy fears that if companies do attain pricing power, many
consumers -- who have little pent-up demand -- will balk at paying
the higher prices. Companies then might find themselves in a
position where they are generating the same revenue by selling fewer
units at higher prices.
That is a train wreck known as stagflation. But move along, there is
nothing to see here. |
