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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (24539)	2/28/2005 9:29:29 AM
From: mishedlo	Respond to of 116555

Stagflation setting in for now? U.S. inflation heats up in January; spending flat - Monday, February 28, 2005 2:03:49 PM afxpress.com WASHINGTON (AFX) -- U.S. consumer spending was flat in January even as a key measure of inflation heated up, the Commerce Department reported Monday Meanwhile, nominal incomes fell 2.3 percent in January, marking the largest decline in 11 years in a reversal of December's record 3.7 percent gain tied to Microsoft payment of a special dividend to shareholders Wall Street economists had been expecting last month's spending to rise 0.1 percent and incomes to fall 2.6 percent, according to a survey conducted by MarketWatch. The nation's personal savings rate fell to 1 percent from 3.6 percent in December. Excluding effects of the one-time Microsoft payment, incomes rose 0.5 percent in January after a 0.6 percent gain in December Consumer prices rose 0.2 percent in January, according to the personal consumption expenditure price index, the Federal Reserve's preferred gauge of consumer inflation. The core PCE price index rose 0.3 percent, the biggest gain since October 2001. The core rate, which excludes food and energy prices, is now up 1.6 percent on a year-over-year basis, matching the high for this economic recovery Adjusted for inflation, real spending fell 0.2 percent. It's the first drop in real spending since June Spending on durable goods, including autos, fell 4.7 percent in January after rising by 4.4 percent in December. Real spending on nondurable goods rose 0.8 percent, while real spending on services gained 0.2 percent With inflation heating up and spending faltering, a hint of stagflation is in the air. Most economists believe, however, that the January pause in spending will prove temporary, due more to trends in the auto industry than to underlying forces in the economy. Others say consumers have borrowed to the hilt and won't maintain their spending pace once interest rates rise further, however The Federal Reserve is expected to raise its short-term borrowing target rate to 2.75 percent at the March 22 meeting. Fed officials have said inflation remains contained but are vigilant against a breakout Real spending is up 3.4 percent in the past year Real disposable incomes fell 2.8 percent in January, also the largest decline in 11 years. Real disposable incomes are up 3.5 percent in the past year Compensation from wages and salaries increased 0.7 percent, the biggest increase since July. Wages rose 0.6 percent, while supplements, such as fringe benefits, increased 1.1 percent Proprietors' income increased 1.7 percent, while rental income fell 2.6 percent Income from assets fell 17.3 percent in January after rising 22.1 percent in December, again on the Microsoft dividend Nominal per capita income fell to $27,606 in January from $28,429 in December. This story was supplied by MarketWatch. For further information see www.marketwatch.com