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Apr-17-2008

In Fed report, signs of continued weakness in US

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NEW YORK, April 15 (Reuters) - Strong U.S. producer price growth in March may bode ill for Wednesday's reading on inflation at the broader consumer level, even though the two measures do not always move in lock-step. (More...)
All of which could spell more trouble for consumers in the coming months. (More...)
New home construction fell twice as much as expected during March, to the lowest level in 17 years, the Commerce Department reported. (More...)
On the overnight session on the Sydney Futures Exchange, the Share Price Index 200 contract closed up 150 points at 5,640, in a surge of 2.7 per cent. (More...)
Across the Atlantic, UK annual inflation remained stable in March, lingering above the central bank target for the sixth straight month, an official report showed Tuesday. (More...)
One wonders what the Fed and the USG were doing. (More...)
The Chicago area, including Gary, Ind., and Kenosha, Wis., saw the largest increase in prices over the last year, compared with New York and Los Angeles. (More...)
The global problems of food and energy are beginning to percolate violently as rice prices surge to all time highs for the second straight day. (More...)
The EUR/USD pair continues to consolidate within an ascending triangle, suggesting some potential for a break higher to test at least 1.60. (More...)
Looking ahead, the Initial Jobless Claims and Continuing Claim index will kick the New York session Thursday morning at 12:30 GMT. Attention will then shift to the Leading Indicators and the Philadelphia Fed index due at 14:00 GMT. Fed speak will also attract dollar traders' attention as market participants look for signs to the Fed's next move in speeches delivered by Kohn and Fisher. (More...)
Given the EU's current inflation readings, any idea of immediate rate cuts there look bleak and is at the heart of the Dollar break today. (More...)
The net house price balance declined to minus 78.5 percentage points in March from a revised minus 65.7 percentage points in February. (More...)
China's robust economic growth is one key reason for rising commodities prices. (More...)
In March the core reading was up 0.2 percent from February, in line with forecasts. (More...)
The data also pointed to a continuing deterioration in the housing sector as building permits fell 5.8 percent to the lowest since April 1991, when the economy was in recession. (More...)
Today's report showed energy expenses jumped 1.9 percent, the most since November, after a decrease of 0.5 percent the prior month. (More...)
Southwest Airlines Co., the biggest low-fare carrier, said on April 11 it raised round-trip fares by as much as $12, following a larger rival for the first time in boosting prices after jet-fuel reached a record. (More...)
"Consumer spending was characterized as softening across most of the country, with some districts reporting year-over-year declines in retail and or auto sales," the Fed report said. (More...)
In another reflection of the squeeze on ordinary Americans, the Labor Department said that average weekly earnings for nonsupervisory workers dropped by 1 percent last month, compared with a year ago, the sixth straight month that inflation-adjusted wages have fallen. (More...)
Economists had expected capacity utilization to remain unchanged compared to the 80.4 percent originally reported for the previous month. (More...)

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NEW YORK, April 15 (Reuters) - Strong U.S. producer price growth in March may bode ill for Wednesday's reading on inflation at the broader consumer level, even though the two measures do not always move in lock-step. U.S. producer prices advanced at a worrying rate of 1.1 percent last month on the back of surging energy costs, according to a report released on Tuesday, raising concerns that the Federal Reserve could be stoking inflation with its campaign of aggressive interest rate cuts. The fact that underlying producer price growth, which subtracts food and energy prices, was more subdued did little to mitigate inflation concerns, and the report led some analysts to raise their expectations for consumer prices while the marketplace trimmed bets on a big Fed cut this month. [1] Food costs increased a more modest 0.2 percent last month, as a drop in pork, diary and fruit prices helped keep overall food costs tethered. Economists said the latest consumer price readings would give the Federal Reserve more room to continue its interest rate-cutting campaign to help fire up flagging U.S. economic growth. "For the Federal Reserve this inflation news brings some relief.[2]

When volatile food and energy prices are excluded, prices rose 0.2 percent. Businesses have resisted passing along the higher costs of their raw materials to consumers -- which is keeping "core inflation," or the increase in the prices of goods other than food and energy, within a zone that the Federal Reserve can live with. "It's hard for them to pass along higher costs when the consumer is on the ropes," Menegatti said.[3] The Consumer Price Index came in exactly as expected, with a 0.3 percent increase in the overall inflation rate, and a 0.2 percent jump in core prices, which exclude food and energy costs.[4] WASHINGTON (AFP) — U.S. consumer prices rose modestly in March, after remaining flat in the prior month, following a rise in energy costs in recent weeks, a government report showed Wednesday. Economists warned that wholesale prices for energy and food have spiked and that this could spur more pronounced consumer price hikes in coming weeks. The Labor Department said in a monthly update that its Consumer Price Index (CPI) rose 0.3 percent in March.[2] Wednesday, April 16, 2008 9:21:59 AM - Wednesday morning, the Department of Labor released its report on consumer price inflation in the month of March, showing that consumer prices increased in line with economist estimates amid a jump in energy prices. The Labor Department said its consumer price index rose 0.3 percent in March after coming in unchanged in the previous month.[5] Wednesday, April 16, 2008 2:53:27 PM - Wednesday was a frenetic day on the economic front, with traders taking in key inflation data from both sides of the Atlantic as well as another troubling report on the beleaguered U.S. housing sector. As expected, the Labor Department said before the opening bell that its consumer price index rose 0.3 percent in March after coming in unchanged in the previous month.[6]

The Labor Department's Consumer Price Index, the federal government's primary inflation yardstick, is forecast to show a 0.3 percent gain from the prior month, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR. The data will be released at 8:30 a.m. EDT. Economists' latest estimates ranged from 0.1 to 0.5 percent. In February, the agency reported that consumer inflation posted its mildest reading in six months as energy and food costs moderated.[7]

The less volatile core reading (which excludes the very closely monitored fuel and food components that have driven consumer sentiment to multi-decade lows) ticked higher on an annual basis to a 2.4 percent rate. On a historical basis, these numbers are slightly lower than the highs read at the turn of the year; but from a policy standpoint, price pressures are still well above the Fed's 2.0 percent target rate. Therefore, policy makers will no doubt continue to allude to upside inflation pressures as they weigh the importance of balancing fianancial markets and economic expansion against the hazard of soaring inflation when making future rate decisions. Looking through the breakdown of the CPI survey, on the other hand, there may be clues that policy makers may be justified in its focused efforts to stabalize markets rather than respond to inflation. Digging into the data, it was clear that both food and energy factors were playing a big role in driving costs.[8] In the 12 months to March consumer price inflation has risen by 4 per cent, while the core CPI has risen by 2.4 per cent. U.S. housing starts fell by 11.9 per cent in March to a seasonally adjusted 947,000 annual rate, its lowest level in 17 years and after a drop of 0.7 per cent in February to 1.075 million.[9] Inflation rose substantially in the month of March, according to both the consumer price index (CPI) and producer price index (PPI), and many analysts expect it will worsen as the U.S. Federal Reserve continues slashing its benchmark lending rate to fend off a recession.[10] The U.S. consumer price index (CPI) rose 0.3% in March while the core rate, which excludes food and energy prices, was up 0.2%, following flat readings in February.[11] The statistical office noted that increase in the rate of annual inflation was due to higher energy prices. Month-on-month, the Consumer Price Index, or CPI, rose 0.5%, unchanged from the prior month and unrevised from its initial estimate. The Harmonized Consumer Price Index, or HICP, annual growth slightly accelerated to 3.3% from its preliminary estimate of 3.2%.[12]

The Consumer Price Index showed that overall prices are up 4 percent over the past 12 months while core inflation, which excludes energy and food, has risen by 2.4 percent in the past year, including a 0.2 percent March increase.[13] The report also showed that the core consumer price index, which excludes food and energy prices, edged up by 0.2 percent in March after coming in unchanged in February. Both reports were in-line with economist estimates.[6]

In economic news, wholesale price growth in March came in well above expectations, according to a report released by the Department of Labor on Tuesday, with significant increases in food and energy prices contributing to the faster than expected growth. The Labor Department said its producer price index rose 1.1 percent in March following a 0.3 percent increase in the previous month.[14] Gallagher raised the prospect of new rate cuts after a Labor Department survey showed consumer prices rose a modest 0.3 percent in March amid a spike in energy prices.[15] The Labor Department said consumer prices rose by 0.3 percent in March, after being unchanged in February, as energy prices jumped by 1.9 percent and airline fares, reflecting higher fuel costs, increased 3 percent, the biggest one-month gain in six years.[13]

There were few surprises from the frontline inflation readings for the U.S., which may leverage greater weight on the otherwise battered dollar. According to the Labor Department's data, prices for goods comprising the broad consumer basket rose 0.3 percent through March, and in turn holding the annualized rate up to a 4.0 percent clip - both as expected.[8] Core Producer Prices rose to 2.7 percent from 2.4 percent - spurring bullish sentiment for the U.S. dollar as many market participants began to cut bets of another aggressive rate cut by the Fed. Manufacturing activity showed faint signs of recovery as the Empire Manufacturing index rose to 0.6 from minus 22.2, while capital inflows to the U.S. picked up as the Net Long-Term TIC Flows index increased to $72.5B from $57.1B. Amid the better than expected data for the economy, the housing market has yet to show any clear signs of recovery as the NAHB Housing Market index held near the record low for the third consecutive month.[16] WASHINGTON (AFP) — Further Federal Reserve interest rate cuts appeared more likely Wednesday after government reports showed a modest rise in inflation and that the housing market remained mired in a deep slump. Many economists expect the U.S. central bank to continue its aggressive rate-cutting campaign at a looming two-day meeting on April 29-30, especially as a growing number of analysts believe the world's largest economy has fallen into a recession. "For the Federal Reserve this inflation news brings some relief. If inflation expectations are kept under control by such evidence, then the Fed has a freer hand to cut rates," said Stephen Gallagher, an economist at Societe Generale.[15] Inflation pressures notwithstanding, the Federal Reserve has been aggressively cutting interest rates in the past seven months, dropping the federal funds rate by three percentage points, to 2.25 percent. Leaders of the Fed do not want to cut that rate much further, as they want to save room for further cuts if the economy gets worse. The central bank is likely to cut the rate another quarter of a percentage point during its April 29 to 30 meeting, as suggested by trading in futures markets, with a smaller chance that it will cut by half of a percentage point.[3] The favourable inflation data gives the Federal Reserve room to do more work on the economy. Policymakers meet April 29-30; at their last meeting, they cut the federal funds interest rate by 75 basis points to 2.25 per cent.[17]

The Federal Reserve has been reducing interest rates recently to counter the economic slowdown,''rather than raising them''to combat inflation. '''The bigger picture, as it is being sold these days, is that we should not be concerned with inflation, only with the economy,''' Laurenti explained. '''I think the slowdown in prices is not happening to the extent that the Federal Reserve was anticipating ''' I think these inflation numbers are biting.'''[18] Inflation, combined with falling home values and mounting job losses, is leading to cutbacks in consumer spending that may push the economy into a deeper recession. Federal Reserve policy makers will likely lower the benchmark interest rate again this month as reviving growth remains their highest priority. "Their primary focus has to be on the downside risk to growth,'' said Brian Bethune, director of financial economics at Global Insight Inc., in Lexington, Massachusetts.[19] Janet Yellen, president of the Federal Reserve Bank of San Fransciso, in a speech Wednesday, said the economy "has all but stalled and could even contract over the first half of the year." The report underscored the challenges facing Bernanke and his colleagues as they fight to keep the economy from sinking into a deep recession, while at the same time avoiding a flare-up of inflation. The report will figure prominently when the Fed meets April 29-30 to decide its next move on interest rates.[20] Industrial production is expected to slip by 0.1% in March, while capacity utilization is projected to come in at 80.3%. At 2 pm Eastern Time, the Federal Reserve will release its so-called Beige Book. This report compiles anecdotal economic information from the Fed's 12 regional districts. The purpose of the Beige Book is to indicate the general economic conditions Fed officials are facing a couple weeks ahead of their next interest rate decision. Against the euro, the yuan extended its Asian session's losses. The yuan declined to a 4-week low against the euro during this time. Today, the Chinese central bank unexpectedly raised its reserve requirement ratio by 50 basis points to 16%.[21]

As a result products price level raise, then factories production capacity increased in order to have ability covering consumers' demand that leads to push up money supply quantity in the market. All these economic changes will improve recent growth rate and positively influence the local currency value, therefore usually consumer price index affects the currencies market significantly. At the same time consumer price index has appointed effect on stock market with a moderate level, so if it shows rising value the bad effects probably appears on inflation rate, which in most cases are unpleasant event for stock market investors, because its mean Fed Reserve will start looking to adopt new strategy enable to adjust the recent inflationary situation.[22] Eurozone inflation The eurozone's harmonised index of consumer prices rose a final 3.6 per cent year-on-year rate in March, revised up from a provisional estimate of 3.5 per cent, taking headline inflation to a new record high for the period since the launch of the euro in 1999.[9] U.S. consumer prices The U.S. consumer price index rose by 0.3 per cent in March, matching most economists' expectations.[9] The agency's Consumer Price Index rose 0.3 percent in March, as economists had expected.[23] The Consumer Price Index, a bellwether inflation gauge that includes prices from a basket of common consumer goods, rose 0.3 percent in March after staying flat in February.[24] The next upward target is $960.30, the high crossing of March 27. On the economic front Wednesday morning, the Department of Labor said its consumer price index rose 0.3 percent in March after coming in unchanged in the previous month.[6] Prices continued to climb in March, rising 0.3 percent, according to the Consumer Price Index (CPI) released Wednesday by the Bureau of Labor Statistics of the U.S. Department of Labor.[18]

The U.S. headline consumer price index for the month of March is expected to rise 0.4 percent to leave the annual rate of growth at 4.0 percent.[25] On an annual basis, headline consumer price growth remained at 4 percent in March, while the annual rate of core consumer price growth edge up to 2.4 percent in March from 2.3 percent in the previous month.[26]

So-called core inflation, stripping out food and energy prices, rose 0.2 percent in March and 2.4 percent at an annual rate, continuing to inch up as consumer sentiment and employment have dropped.[27] Economists at consulting firm Global Insight said the March increase can be attributable to a rebound in energy prices and "continued strength" in food costs. They added that "rising pipeline cost pressures from energy and other commodities continue to frustrate expectations of a better overall inflation performance, as the economy weakens and the unemployment rate rises."[7] The forecast is for even bigger energy-related increases to come, including the possibility of $4 per gallon gasoline by Memorial Day. Those inflation pressures are occurring just as the economy seems to be sinking into a recession, with consumers cutting back on spending and the housing industry, where all the troubles started, sinking further. That was the somber news from a batch of economic reports released Wednesday that depicted an economy still struggling with multiple problems from a prolonged slump in housing, soaring energy prices, a severe credit crisis and rising unemployment.[13]

The price of some food staples showed even bigger increases over the past year, including a 14.7 percent rise in the price of bread and a 13.3 percent increase in milk prices over the past year. With crude oil prices briefly touching a new record near $115 per barrel this week, and food prices remaining under pressure because of global shortages, analysts predicted consumers will feel more inflation pressures in the months ahead.[13] "Nothing is going right at the moment," said Mark Zandi, chief economist at Moody's Economy.com. "That is why consumer confidence has fallen to the lowest point since the early 1980s." With crude oil prices briefly touching a new record near 115 per barrel this week, and food prices remaining under pressure because of global shortages, analysts predicted consumers will feel more inflation pressures in the months ahead.[23]

Oil prices surged to a new high, passing $113 a barrel, and the government reported that prices at the wholesale level jumped 1.1 percent in March. '''These are going up way too rapidly,''' said economist Joel Naroff of Naroff Economic Advisors. '''This is the money that the average person has to spend, and as a result they don'''t have a lot of money left over for other things.''' Food and energy prices tend to move up and down more quickly than other goods, but lately they'''ve only been moving in one direction.[28] Through the year's first three months the index has been growing at a whopping 10.2 percent annualized rate. Rising costs of food products, combined with a run-up in the price of energy items such as diesel fuel and gasoline, drove much of the rise in producer prices. Because food and energy prices are so volatile, economists often prefer to strip out those two elements and focus on the core reading.[29] Core CPI, which excludes volatile food and energy prices, is used by the Fed as a more stable inflation indicator. While the Fed officially uses the core personal consumption price index as its inflation guide, core consumer prices are a very close substitute.[30] In the United States, the March Consumer Price Index showed a 4.0% year-on-year rise, reflecting soaring food and energy costs, while inflation statistics in the European Union and China also showed serious increases.[31] Continued increases in food, services and fuel costs may drive inflation above 10 percent, doing away with a decade of efforts to keep consumer prices at bay and reduce poverty.[32]

Looking at inflation pressures more broadly, the report revealed that consumer prices have risen 4.0 percent in the 12 months to March, partly as crude oil prices have skyrocketed.[15] "There is more evidence of the cost-push inflationary pressures, which are continuing to hit the economy and which to some extent are complicating the Fed's task of framing appropriate monetary policy." BNP said it was raising its prediction for March consumer price growth to a 0.3 percent monthly rise from its previous 0.2 percent, even while it acknowledged that producer prices often send misleading signals for CPI. It cited the strength in residential electricity and natural gas prices, components which "do tally up well with their CPI equivalents," a BNP research note said.[1] The food component grew 0.2 percent over the month, gasoline prices jumped 1.3 percent and housing related fuel and utilities surged 2.0 percent. While these components impose a very real burden on consumers, many analysts consider the surge to be temporary. What's more, the pick up in these costs has already dampened consumer spending and will no doubt cool consumption going forward. Fading consumption in the economy's largest sector will likely lead the Fed to redouble its policy efforts to jump start growth and businesses will eventually lower prices to compete for fewer American dollars.[8]

Stripping out food and energy, core prices, which also held steady in February, rose an even milder 0.2 percent, restrained by a big drop in the cost of clothing. The data underlined strains that U.S. consumers face, squeezed by rising prices at the gasoline pump and in food stores, only partly offset by cheaper clothes, while prices they get for their homes fall and house-building declines.[33] Even the core index, which omits volatile energy and food items, rose 0.2 percent, a sign of the effects of higher gas prices on a wide range of consumer purchases.[34] Core PPI increased only 0.2 percent but food and energy prices pushed the overall index to an increase of 1.1 percent.[18]

The government measure of inflation at the wholesale level, the Producer Price Index, came in much higher than forecasts. That reading raised fears that higher food and energy prices could stop the Federal Reserve from being as aggressive in its efforts to spur economic growth.[35] With inventories of unsold goods starting to pile up, retailers in the Richmond, Va., and San Francisco regions have canceled orders, the report noted. Lofty energy prices are squeezing businesses' profits and pinching consumers, leaving them with less money to spend on other things. That is putting a damper on economic growth and adding to inflation pressures.[36] The report on consumer prices showed rising energy prices continuing to exert upward pressure on overall inflation.[33] Total consumer price inflation is up 4% over the past year with sharp jumps in food and energy prices leading the way.[10] Consumer Price Index shows modest gains in inflation on higher energy prices.[35] Why is it useful? Consumer Price Index is one of the most important inflation indicators, which provides apparent signs of recent inflation rates. Partly this index point out consumers' expenditures level and their willing to buy local products and services available at the market, that will cause increasing in goods & services demand level which usually affected by different changes in consumers economic conditions such as income level related to consumption and expenditures level.[22] The consumer price index figures for March weren't the runaway disaster many had feared, but that only shows how rough things have become, as the U.S. economy deals with the twin problems of inflation and a slowdown.[37] "There was little good news" in the March producer price index, noted Mark McMullen of Moody's Economy.com. Even though inflation at the wholesale level has been "very rapid" all through the first quarter of 2008, he said, manufacturers will find it difficult to pass their higher costs down the line to consumers because the economy's weakness has caused a sag in retail demand.[29]

During the Greenspan-Bernanke era the Fed has embraced the view that stability in the economy and stability in prices are mutually consistent. As long as inflation remains at or below its target level, the Fed's modus operandi is to panic at the sight of real or perceived economic trouble and provide emergency relief. It does this by pushing interest rates below where the market would have set them. With interest rates artificially low, consumers reduce savings in favor of consumption, and entrepreneurs increase their rates of investment spending.[38] Outside the volatile areas of food and energy, inflation rose 2.4 percent over the past year. Some economists say worries about inflation will be trumped by growing concerns about the slumping U.S. economy when officials at the U.S. central bank consider interest rates at the end of this month.[39] "Energy price relief would probably come from a U.S. economic slowdown, but food price relief is going to require a better harvest than last year and some rethinking of bio-fuels policies,'' Low said. Brazilian users cite faster inflation as the reason why they expect the country's central bank to raise its benchmark rate a quarter-percentage point to 11.5 percent today.[32]

The core inflation reading was a little more noteworthy as it inched higher to 2.4 percent from 2.3 percent. Under normal circumstances, these elevated price pressures would raise a red flag on impending rate hikes from the Fed, but higher figures have failed to turn the policy body from deep cuts. Elsewhere, the housing market spiraled ever deeper into its recession as housing starts plunged to a 17 year low to an annualized 947,000-unit pace of construction, while permits dropped to an equivalent low.[40] Joel Naroff, the president of Naroff Economic Advisors, agreed the inflation report gives the Fed elbow room to cut rates anew, but said inflation pressures are building, especially as a falling dollar makes imports more expensive. The central bank -- led by chairman Ben Bernanke -- has slashed its key base rate by three percentage points to 2.25 percent since September and pumped hundreds of billions of dollars into the stressed financial system in a bid to fire up slowing economic growth.[15] If inflation seeps into the broad economy the Fed's ability to cut rates will be curtailed. Although "there were pipeline pricing pressures evident" in the report "that argue for the Fed to let up on the aggressive rate-cutting campaign," said Merrill Lynch economist David Rosenberg, he said Fed policymakers are nonetheless likely to continue cutting rates when they meet at the end of the month. "The inflation hawks on the Fed will likely ratchet up their screeching, and this report doesn't help" those who are focusing on the need to stimulate the economy through rate cuts, echoed Joel Naroff, head of an economic consulting firm that bears his name.[29] Fed chairman Ben Bernanke, who has presided over a series of aggressive rate cuts since September, has said that slowing U.S. growth will likely tame inflationary pressures. If inflation remains muted, it would make it easier for the Fed to cut rates further amid mounting concerns that the U.S. economy will endure a recession during the first half of this year.[2]

The rate of inflation is almost a direct response to the depreciation of the U.S. dollar, which fell a full 1% against the euro to $1.5969, a record low and the currency's biggest decline in three weeks. The dollar has plunged 15% against the European currency since September, the month the U.S. Federal Reserve first began cutting its target lending rate. The Fed has cut its benchmark Federal Funds Rate six times since September taking it from 5.25% to 2.25%.[10] A broad measure of the money supply (MZM) reported by the Federal Reserve Bank of St. Louis increased at an astounding annual rate of 37.7% from the end of January until Mar. 24. With this money supply surge and February's price gains (from February 2007) of 4% for consumer goods, 6.4% for producer goods and 13.6% for imported goods, it's no surprise that inflation expectations have risen. It's also no surprise that the dollar remains debilitated, which makes Secretary Paulson's Beijing weak-dollar message so bizarre, particularly since it is based on an incorrect premise propagated by many prominent economists.[38] Adolfo Laurenti, senior economist with Chicago-based Mesirow Financial Holdings Inc., sees the long-term trend in prices as something that consumers should be concerned about. While the Federal Reserve has been emphasizing the core numbers, he noted, the overall CPI actually gives a better picture of trends in prices. '''Normal people buy energy, buy gas, buy food, and you have to acknowledge that those numbers are higher and you have to come to terms with it,''' Laurenti said. While Laurenti said that direct correlations cannot automatically be made between the PPI and CPI in the same month, he believes the food category is definitely showing a trend of producers passing along their increased costs to consumers.[18] While it is less important to consumers, there is also the "core" CPI, which excludes the cost of food and energy. Economists prefer this measure because food and energy prices are extraordinarily volatile, as consumers well know.[4]

Overall prices rose 0.3 pct, while core inflation, which strips out volatile food and energy prices, rose 0.2 pct in March, in line with forecasts of economists polled by Thomson's IFR Markets.[41] Core inflation, which excludes food and energy prices, unchanged in February, rose 0.2 in March.[42]

A key gauge of inflation in the U.S. economy rose slightly in March, as soaring energy prices overwhelmed declines in some other areas.[39]

U.S. consumer prices climbed 0.3 per cent in March, boosted by a 1.9 per cent jump in energy prices, the Labour Department reported.[17] Germany's consumer price inflation for March was confirmed at 0.5 per cent month-on-month and at 3.1 per cent year-on-year.[9]

In line with the global trend of rising prices, the French statistical office INSEE showed the consumer price inflation in the nation rose more than expected in March.[14]

WASHINGTON (Reuters) - U.S. home building skidded to a 17-year low last month while consumer prices rose slightly less than expected, leaving policy-makers room to cut benchmark interest rates further to ward off a housing-led slowdown.[33] The fact that the CPI report showed consumer inflation as roughly in line with forecasts should assure investors who are hoping for further interest rate cuts from the central bank. The report showed a sharp 1.3% drop in clothing prices, with the declines seen across all categories of those goods, suggesting that weak sales are prompting retailers in the sector to cut prices.[35]

Since a year ago, the CPI is up 4 percent overall, with core prices up a more manageable 2.4 percent. This news gives the Federal Reserve plenty of room to lower interest rates when the meet next at the end of this month.[4] Impact: No matter what's going on in the world, CPI commands the spotlight, but never moreso than now, when rising inflation threatens to derail the Federal Reserve's efforts to boost the economy with interest rate cuts.[4] For the U.S. economy, that struggle is important: If inflationary pressures remain largely contained the Federal Reserve can continue to cut interest rates in an effort to spur the slumping economy.[29]

Investors are wary that signs of rising inflation could throw a wrench in any Federal Reserve plans to continue to aggressively cut interest rates.[43] Overall inflation is up an unadjusted 4.0% for the year ending in March, matching the 12 months through February, but slightly off the two-year high of January. The absence of any inflation shock will probably allow the Federal Reserve to feel comfortable continuing its pro-growth campaign and cutting interest rates at the end of the month.[37]

The dollar rose on economic reports that suggested the Federal Reserve might not continue cutting interest rates quite so aggressively.[44] The Federal Reserve's so-called Beige Book bolstered hopes of a further interest rate reduction, noting economic conditions have weakened since the last report.[45]

The Federal Reserve is expected to again lower key interest rates in an attempt to boost a sluggish economy, Bloomberg reports.[34]

"Reports from the 12 Federal Reserve Districts indicate that economic conditions have weakened since the last report," the Fed's Beige Book said. It also noted rising prices across the country, specifically in chemicals, metals, plastics and other petroleum-based products, the building blocks of an economy. Earlier the People's Bank of China ordered all Chinese lenders to increase the cash they reserve as a percentage of their assets to clamp down on excessive lending.[31]

Analyst estimate: 0.3 percent increase in overall prices and a 0.2 percent increase in core prices since February. Actual: The estimate was right on the nose this month. What was expected: As expected, this report gives the Fed plenty of room to lower its target for the key Federal funds rate by at least one-quarter of a point when policymakers meet in two weeks.[4]

Core CPI, which excludes the volatile energy and food prices, is also expected to rise 0.2 percent in March, according to the Thomson/IFR poll.[7] Core CPI, which excludes food and energy prices, is expected to increase 0.2% from February's flat rate.[21]

The bigger than expected increase by the index was due in large part to a sharp rise in energy prices, which rose 2.9 percent in March after rising 0.8 percent in February.[26] The food and beverage component of the index rose 0.2 percent in March, and based on the first quarter, is projected to rise 5.1 percent for the year.'' Bread prices, for example, are now 14.7 percent higher than a year ago, tracking with the increase in the raw material prices for those items.[18]

The Consumer Price Index increased 0.9 percent in March and 4 percent over the previous year, the Labor Department reported Wednesday. It was the fifth straight month the measure of retail prices has been at 4 percent or more, compared with the 2007 average of 2.85 percent.[27] The consumer price index climbed 0.3 percent, after no change the prior month, the Labor Department said today in Washington.[19]

New York, NY (AHN) - Higher oil prices helped consumer prices rise 0.3 percent in March, the Labor Department said Wednesday.[34] Consumer prices were up 0.3 percent last month, the Labor Department said yesterday, driven by sharp increases in the prices of natural gas and heating oil.[3]

Separately, the Labor Department said consumer prices rose 0.3 percent last month, below the 0.4 percent forecast, after a flat reading in February.[33]

The Labor Department inflation snapshot showed that rising energy costs accounted for much of the rise in consumer prices last month.[2] U.S. producer prices jumped a larger-than-expected 1.1 percent last month, as surging food and energy costs continued to fuel inflationary pressures along the manufacturing pipeline, the Labor Department said Tuesday.[29]

The March producer price index--which measures inflation at the wholesale level--is expected to show a 0.6% increase, mainly because of food and energy costs.[43] WASHINGTON -- Government data due out Wednesday is expected to show that consumer prices resumed an upward climb in March due mainly to higher energy and food costs.[7]

April 16 (Bloomberg) -- U.S. consumer prices rose in March, driven by higher food and fuel expenses that indicate Americans will spend less on other goods.[19] Consumer prices rose 0.3% in March after being unchanged in February. The housing sector's sharp decline "will be a major drag" on the economy throughout this year.[46] Consumer prices in Brazil during the 12 months through March rose 4.73 percent, the highest reading since March 2006 and above the central bank's target of 4.5 percent, plus or minus 2 percentage points.[32]

The benchmark 10-Year yield jumped to 3.598 percent from 3.513, while the 2-Year yield surged to 1.823 percent from 1.762. Looking ahead, the Consumer Price Index will kick off the morning and will be followed by fresh housing data scheduled for 12:30 GMT. At 13:15 GMT, our focus will be turned to the Industrial Production index as we forecast production to pick up, with the day coming to an end as the Fed releases their Beige Book at 18:00 GMT.[16] The Consumer Price Index matched economists consensus for no change to the headline reading at 4.0 percent annualized.[40]

The Consumer Price Index, the government's key inflation measure, rose 0.3%, compared to February, when prices were unchanged.[35] Housing, which accounts for 40 per cent of the consumer price index, rose 0.4 per cent.[17] Consumer prices, excluding fuel and heating oil, rose by 2.3 per cent year-on-year.[9]

Gasoline pump prices hit a new nationwide record of 3.40 per gallon on Wednesday, up 53 cents from a year ago, according to the Oil Price Information Service and AAA, and many economists believe that price will hit 4 per gallon by Memorial Day. Zandi said the rise in food and fuel prices has been a significant drain on consumers' purchasing power, another reason he and other analysts believe the country has fallen into a recession.[23]

Not traditional labor inflation, but price inflation stemming from the food and energy sectors. Normally economists strip these sectors out as they attempt to get to a more basic reading, commonly referred to as 'core inflation'. This old time mental rigidity makes little sense to me, given the food riots taking place in a number of countries and energy prices in a run away mode.[47] We're experiencing the worst food-price inflation in 17 years, and panic over escalating prices seems to have finally set in. Maybe the commentators in the media don't eat and drive, or maybe their paychecks are so large that they have someone to venture to their local grocery and gas station for them. Regardless, they're out of tune with how expensive the cost of living has become. For a long time now, they've waved off the rising prices by consistently focusing on the core inflation figure that strips out the energy and food costs. On that basis, inflation still hasn't looked so bad this time around.[48]

The CPI, released monthly, measures the average change in prices over time, using a basket of goods that most consumers purchase. This basket includes food, energy, transportation, housing, medical costs and clothing.[18]

The 1.3 percent fall in clothing prices implies that retailers are being forced to cut prices to try to lure hard-pressed consumers, whose budgets are stretched by soaring gasoline prices and food costs, into stores.[33]

There were signs that inflation and particularly the soaring cost of food has started to recede, welcome news for the Federal Reserve as it tries to avert a prolonged recession while keeping prices in check.[24] Greenspan-Bernanke have followed a controlled inflation regime of 3% rather than the proclaimed policy of '''price stability.''' Why they have followed such a regime is a very profound question and its real answers will reveal the criminal nature of the Federal Reserve ''' harming the general population for the benefit of Bankrupters and Fraudsters of New York City ''' but I will cover that at some other time.[49]

The acceleration in the core index provides "supportive ammunition for the hawks" at the Federal Reserve, said Northern Trust economist Asha Bangalore. She added, "inflation is a lagging indicator which peaks long after an expansion in economic activity has ended." With the U.S. economy now rapidly losing momentum, Bangalore said, it's likely that "a moderation in inflation will emerge as the economy slows in the next few months."[29] There were big share price gains despite crude oil prices scaling new heights and a glum assessment of the American economy by the U.S. Federal Reserve.[45]

Manufacturers and others businesses, meanwhile, were walloped by zooming prices for energy and other raw materials. Their ability to jack up retail prices to customers was mixed, with some companies restrained by competitive pressures, according to the Federal Reserve's new snapshot of nationwide economic conditions released Wednesday.[36] The growing price pressures in the United States, coming at a time of economic weakness, is setting up a quandry for the Federal Reserve.[31]

U.S. Treasury Secretary Henry Paulson's blundering is becoming more breathtaking with each passing week. At the end of March he rolled out a grand plan to crown the Federal Reserve as the nation's new financial stabilizer. The Fed a stabilizer? That's who created the financial mess we're in. If this wasn't bad enough, Secretary Paulson then donned his cheerleader's uniform and encouraged Beijing to let the Chinese yuan appreciate against the greenback. All the while favoring in this fashion a debasement of the U.S. currency, Paulson proclaimed that we should remain calm and confident because the economic fundamentals are sound. He reminds me of the stockbroker who performed a valuable service to his partners by always being wrong.[38] The report also forecast more gloom for the housing market in the coming months, as a large number of adjustable-rate mortgages will reset to higher rates in May and June, likely increasing the already high numbers of foreclosure. On a brighter note, Tuesday morning, the Federal Reserve Bank of New York released its report on manufacturing activity in the state of New York, showing that activity unexpectedly stabilized in April after deteriorating in February and March.[14] In a separate report on Wednesday, the Federal Reserve said production output at American factories rose 0.3 percent in March after falling 0.7 percent in February.[24]

Transportation prices rose 0.7 percent in March, while recreation and education costs rose 0.3 percent, the report said.[42] Energy costs rose 1.9 percent in March, partly as natural gas and heating oil prices surged.[15] Gasoline prices rose 1.3 percent, fuel oil costs jumped 10.1 percent and natural gas prices were up 4.6 percent. Energy costs continue to climb this month.[19]

Excluding food and energy prices, core wholesale prices rose 2.7 percent year-over-year in March compared to 2.4 percent in the previous month.[26] Energy prices rose 1.9 percent in March after a February drop of 0.5 percent, the report said.[42] The report showed that energy prices surged up by 1.9 percent in March following a 0.5 percent decrease in February.[26]

As crude oil Tuesday flirted with $114 a barrel, the CPI saw energy prices rise 1.9 percent, the highest increase since November.[34] A bulk of the increase will likely be the result of food and energy price gains, especially as oil traded above $100/bbl for the entire month.[25]

"Food and energy price increases are taking center stage,'' said Christopher Low, chief economist at FTN Financial in New York, who participated in the survey. "Economists figure it's appropriate to ignore food and energy price increases as long as they're temporary. It's getting a lot harder to argue that they are temporary.''[32]

Some analysts say, however, that soaring energy and food costs could stoke inflation in coming months. "Both remain big question marks in the near future with world supplies of both stretched tight," Global Insight economist Kenneth Beauchemin said of rising energy and food prices.[15] ''Rapid expansion of ethanol production in the U.S. has diverted supplies of corn from grocery stores to gasoline pumps. Underlying all of these is the rising cost of energy, according to Stuart Hoffman, chief economist at PNC Financial Services Group. '''We'''re seeing global problems on inflation, particularly on the food front in countries where their subsistence level (income) doesn'''t give them any room for leeway.'''[28]

Wholesale inflation was up 6.9% year-over-year, while core inflation - which excludes food and energy - was up 2.7%, the biggest unadjusted increase since July 2005. "It's a pretty ugly report," Joseph Lavorgna, chief U.S. economist at Deutshe Bank AG ( DB ) told the International Herald Tribune.[10]

Combined with yesterday's report showing a modest increase in core wholesale price growth, the data may help to ease recent concerns about the pace of core inflation.[26]

While the acceleration in the core CPI rate over the last year, together with the strong March producer price index data released Apr. 15, is a concern, the data was about in line with expectations and is likely to have a modest impact on markets, according to S&P; Economics.[11] The report also showed that the core producer price index edged up 0.2 percent in March after rising 0.5 percent in February.[26]

Fresh economic data helped to strengthen the U.S. dollar as the Producer Price Index surged to 1.1 percent from 0.3 percent on a monthly basis, while rising to 6.9 percent from 6.4 percent on a yearly basis.[16]

Producer prices rose almost twice as much as forecast in March, according to figures reported yesterday, and the cost of goods imported into the U.S. climbed a greater-than-forecast 2.8 percent.[19] The average yield on global sovereign debt, which dropped as much as 1.26 percentage points, climbed 0.26 point to 3.03 percent since March 17, according to indexes compiled by Merrill Lynch & Co. The Labor Department said yesterday that producer prices rose 1.1 percent in March, almost twice as much as economists forecast.[32] A gauge of prices paid by U.S. producers jumped 1.1 percent in March, the Labor Department said Tuesday, accelerating from a 0.3 percent increase in February.[44]

The Labor Department is scheduled to release the consumer price index for March on Wednesday.[29] The consumer price index is expected to rise by 0.3% for March, resuming growth after a flat reading for February.[21]

On Wednesday, the March consumer price index--the main inflation measure--is expected to post a 0.4% gain.[43]

Consumer prices have risen sharply in the 12 months to March, jumping 4.0 percent, the report showed.[2] The government reported Wednesday that consumer prices went up by a relatively modest 0.3 percent in March.[36]

Financial markets saw the consumer price data as providing greater scope for the Fed to lower interest rates but analysts cautioned it did not mean price pressures were easing.[33] While the American central bank has been cutting interest rates to counteract a weak economy and a crisis in the housing market, it will soon have to reverse that policy to fight the inflationary threat. The Fed's Beige Book, which gathers anecdotal information on current economic conditions, put a more personal face on the issue when it reported that businesses in 75.0% of its districts are showing a slowing pace of activity, while consumer spending also has been sagging in most areas.[31] The Dow Jones industrials jumped 256.80 points. The Fed report underscored the challenges facing Bernanke and his colleagues as they fight to keep the economy from sinking into a deep recession, while at the same time avoiding a flare-up of inflation. The report will figure prominently when the Fed meets April 29-30 to decide its next move on interest rates.[36] Commodity inflation presents a problem for the Fed'''s traditional blueprint for handling a recession. In past emergencies, such as the 2001 recession, the Fed cut interest rates to revive the economy.[27] '''The Fed'''s tonic has turned toxic,''' said Lakshman Achutham, managing director of the Economic Research Cycle Institute, a New York-based research firm that studies business cycles. The Fed'''s interest rate cuts, in an attempt to stave off a recession, have consequently fueled inflation, he said, and may end up causing long-term harm. '''Liquidity is the medicine applies to the trouble,''' he said. This money is showing up in inconvenient places, specifically commodities.[27]

Some analysts believe Fed Chairman, Ben S. Bernanke has more reductions in store. "The Fed is not so interested in inflation, currently," Jorg Kramer, chief economist at Commerzbank AG (OTC: CRZBY ) in Frankfurt, told IHT.com, "They have a bigger problem: recession." Kramer thinks the Fed will cut its funds rate to 1.25% by June. The Fed's recently released Beige Book - a collection of anecdotal information gathered from its 12 regional banks - indicated economic conditions have weakened across the nation.[10]

Plosser was one of two policy-makers who voted against the Fed's aggressive 75-basis-point rate cut when the FOMC met on March 18, for fear of fueling inflation. Along with Dallas Fed chief Richard Fisher, he preferred a smaller reduction. He said that he remains worried about inflation.[33] "If we see no relief in inflation, it does make it more difficult for the Fed to cut rates and to stimulate the economy," said Jim DeMasi, chief fixed income strategist at Stifel, Nicolaus & Co. '' 2008 CNBC.com[43] The government and the Fed have been wreaking havoc on our economy. Investors may have cheered on those rate cuts last year, but look what's happening now. Our economy would have stalled a bit from the housing and credit problems, yes, but these issues needed to be worked out on their own, not with the help of the Fed. Now, the cost of living is becoming unaffordable at the expense of those who created the financial mess we're caught in. The Fed meets again later this month, and although analysts have reeled in their expectations for another notable rate cut, they still expect something.[48]

Economists speculated that the broader downturn in the economy had discouraged businesses from raising prices, as consumers struggled with problems in the housing industry and the labor market. Those concerns were reinforced on Wednesday by a Fed report that showed American business conditions weakening in the past few weeks.[24] Declines or downward pressure on home prices were reported in many Fed regions. The Commerce Department, in yet another report Wednesday, said home building sank in March to its lowest point in 17 years, fresh evidence of the depth of the housing market's woes.[36] The housing industry, where the troubles began two years ago, remained under severe strain with construction of new homes and apartments plunging by 11.9 percent in March, the Commerce Department reported, double what had been expected, to a seasonally adjusted annual rate of 947,000 units, the slowest pace in 17 years.[13] The Commerce Department said on Wednesday that housing starts dropped 11.9 percent in March to an annual rate of 947,000 units, the slowest pace since March 1991 and well below the 1.02 million economists had expected.[33]

A Department of Commerce report said housing starts fell 11.9 percent to an annual rate of 947,000 units in March from the revised February estimate of 1.075 million units.[6]

Housing starts fell 11.9 percent to a 947,000-unit annual rate compared with the prior month, marking the lowest level of starts since March 1991. Analysts said the central bank is facing a dilemma, however, as its slew of rate cuts so far have yet to inject fresh life back into the depressed housing market, although such cuts often take a while to filter through the economy.[15]

On the housing front, the rate of home foreclosures soared 57 percent in March, according to research from RealtyTrac Inc. released Tuesday. This marks the 27th straight month of year-over year growth, and more bad news is likely on the horizon.[14] A two-year long housing downturn, a related credit crunch, mounting job cuts and surging gasoline prices have slowed growth to a 0.6 percent annualized pace in the fourth quarter of last year. Another government survey showed the housing market remains in the doldrums.[15]

The increase marked the fastest pace of energy price growth since November of 2007, when prices jumped 6.9 percent.[26] Annual CPI growth in August was just half the current annual rate, but energy prices have shot up since.[30]

NEW YORK (CNNMoney.com) -- Consumers, hit by rising energy prices, paid slightly more for goods and services in March.[35] Price of consumer goods other than food and energy are up 5.5 percent in the past three months.[28] So-called core prices, which exclude food and energy, increased 0.2 percent, also after no change. Both readings matched median forecasts in a Bloomberg survey of economists.[19] The closely watched "core" index, which excludes the volatile costs of food and energy products, rose less than 0.2 percent.[24] Stripping out volatile food and energy costs, the core CPI gained 0.2 percent last month, as most analysts had predicted. Both gauges posted their strongest gains since January.[2] The more-closely watched core CPI reading, which strips out volatile food and energy costs, was up 0.2% in March, after being unchanged in February. That also matched economists' forecasts.[35]

Core inflation, which excludes food and energy costs, increased 0.2 per cent; unrounded, it advanced 0.152 per cent.[17] The sharp housing downturn is causing the economy to stall across much of the nation, suggesting that inflation will remain moderate despite surging food and energy costs.[46]

Businesses must cope with higher prices for food, fuel and energy products and many raw materials, the Fed report said. "Most manufacturers have or are planning to increase prices" in response to such rising costs, the Fed said.[36] The response of companies in the service sector has been more mixed, the Fed said, "in part due to differences in competitive pressures." Overall, most of the Fed's regions reported "little change in retail price inflation," the Fed report said, suggesting that producers _ and their profits _ are getting hit by rising energy and raw material prices.[36] "Ongoing hefty gains in headline prices will continue to needle despite the Fed's near-term focus on economic risk, as the Fed faces an inflation problem that may have greater shelf life than the problems in the financial industry," says Action Economics. At its two-day policy meeting later in April, the Fed will likely be revising down its growth estimates for its three-year forecast horizon, and it will also need to boost its overly optimistic estimates for inflation, according to Action. "This boost in inflation risk may trim the size of the Fed's easing in April, though we will continue to assume a 50 basis point move," says Action Economics.[11] Economic growth is expected to have ground to a halt if not receded in the first three months of 2008. The odds of the Fed carrying on its aggressive rate-cutting policy seem fairly good. The European Central Bank seems intent on keeping inflation its main priority.[10]

'''In recent months we have seen people saving more. This is not because they are saving for the sake of saving, just spending less because they have less income.''' For now, the Fed seems more concerned with the slowing economy than with inflation, according to its most recent meeting minutes released on March 18. Members of the rate-setting Federal Open Market Committee said they expected inflation to moderate in coming quarters due to the economic slowdown, but said that it would be '''necessary to monitor inflation developments carefully.'''[27] Even with the rate reductions, though, consumers have turned more cautious, the Fed report suggested. Consumers are major shapers of the economy because their spending accounts for such a big chunk of overall economic activity.[36] Mining rose 0.9%. Stocks surged and bonds edged higher on Apr. 16 on the mixed economic data, while the dollar was hammered by the notion that the reports indicate the Fed will be able to cut rates at its April policy meeting.[11] The U.S. dollar rose across all the major currencies as rising inflationary concerns spurred speculation that the Fed may hold back on additional rate cuts.[16] The U.S. dollar slid against all its major counterparts Wednesday as data bolstered market participants' confidence in a 25bp rate cut by the Fed on April 30.[40]

The hope for an immediate cut in European Interest Rates was removed today from the currency markets, which resulted in the Dollar falling hard, which in turn drove up commodity prices in a number of commodity markets.[47] The Dollar is breaking down while stock indices are rallying and interest rate futures are breaking sharply lower. This is all indicative to and part of the process where a market prices in inflation.[47] Bangladesh had a tender and got no offers. That just how tight things are," Jack Scoville, analyst with Price Futures Group in Chicago, told Reuters. Interest rates rose in the bond market as investors increased the amount of compensation they receive for the risk of lending money that could be eroded by inflation.[31]

With inflation thriving under traditionally inhospitable conditions, today'''s environment gives credence to a little-appreciated school of thought known as the Austrian theory of business cycles. Theorists in this camp ignore market emergencies and say lower interest rates always create price bubbles that artificially inflate some portion of the economy.[27] Falling interest rates and rising demand for basic materials and foodstuffs is an almost guaranteed recipe for inflation, and price pressures were evident around the world on Wednesday.[31]

Food and energy inflation is not over, Achutham said, and could persist until the Fed '''takes away the punch bowl''' by raising interest rates.[27] The Fed would take the opposite action, raising interest rates, if it was trying to fight inflation.[39]

True to form, the Fed has panicked again, pushing interest rates down and flooding the economy with liquidity.[38]

The increase came as a surprise to economists, who had expected production to fall 0.1 percent. The Fed also released its Beige Book, which said that the U.S. economy has weakened across the nation.[6] Industrial production, a key measure of the economy that is considered in deciding whether a recession has occurred, rose 0.3 percent last month, the Fed said in a separate report.[3] In a separate report Wednesday, the Fed said big industry production nationwide rose 0.3 percent in March, an improvement from a drop of 0.7 percent in February.[36] Separately, the Fed said output at the nation's mines, factories and utilities rose 0.3 percent in March after a downwardly revised drop of 0.7 percent in February.[33]

In the last 12 months, core prices have rose 2.4 percent, at the high end of the Feds presumed "comfort zone" but not beyond it.[24] Asset prices are excluded. (The Fed's core measure for consumer prices, of course, doesn't even include all goods and services.)[38] Definition : CONSUMER PRICE INDEX: An index of prices of goods and services typically purchased by urban consumers. The Consumer Price Index, commonly known by its abbreviation, CPI, is compiled and published monthly by the Bureau of Labor Statistics (BLS), using price data obtained from an elaborate survey of 25,000 retail outlets and quantity data generated by the Consumer Expenditures Survey.[22] The statistical office ISTAT said the Consumer Price Index, or CPI, rose 0.5% month-on-month, at the same pace registered in the prior month.[14] The latest all-items increase in the Consumer Price Index (CPI) was 4.0%. Therefore, '''real''' (inflation-adjusted) retail sales can only be declining.[50]

Analysts expect the consumer price index to increase 0.3%, compared with February's flat rate.[21]

The consumer price index is the government's broadest gauge of costs for goods and services.[19]

What it tells us: This study measures the cost of a fixed basket of goods -- 200 items, from field-grown tomatoes and red delicious apples to shoes and furniture to health care and education -- for urban consumers. It's crunched into an index, and the change in the index gives us the rate of consumer inflation.[4]

"Although commodity cost pressures have been enormous, weak labour market conditions, that are not expected to improve in the near future, are containing labour costs, and core inflation rates along with them," said Kenneth Beauchemin, an economist for Global Insight.[17] Inflation pressures are being largely stoked by rocketing crude oil prices and increased food costs as commodity prices soar around the world.[2] When the economy slows down, the resulting drop in demand normally takes some of the pressure off inflation. These are not normal times: Even as the economy is slumping, oil prices are rising and food prices are jumping.[28]

"Not just because headline is up so much on rising food and soaring energy prices, but the significant re-emergence of inflation pressure at an earlier stage of processing, mainly at core crude and core intermediate prices."[10] Energy prices are expected to provide a modest lift, as should food prices. Over the last year these two components have provided strong upward pressure.[30]

Food prices, which have been steadily rising for more than a year, were up by 0.2 percent in March and 4.4 percent over the past 12 months.[13] Food prices, which account for about a fifth of the CPI, rose 0.2 percent after a 0.4 percent increase the previous month.[19]

Food costs increased a more modest 0.2 percent last month, as a drop in pork, dairy and fruit prices helped keep overall food costs tethered.[15] "The cost of fertilizer and everything has gone up," Heather Wood said. Average wages, by comparison, have risen only modestly over the last year, by just 3.6 percent on a weekly basis, the Labor Department reported earlier this month. San Diego County workers' wages have risen somewhat more quickly in recent years, but so have the prices they're paying, according to the federal agency.[23] The Labor Department reported that "real" inflation-adjusted average weekly earnings for nonsupervisory workers dropped by 1 percent last month nationally, the sixth straight month that inflation-adjusted wages have fallen. Valley Center resident Jarrett Trevino, who was shopping at the Target department store down the road, said he understands that prices have always risen over time, but he's seen a particular squeeze in the last couple of years. That has caused him to delay a recent vacation, he said. "Things go up, but everything's so rapid," he said.[23]

Wednesday's report from the Labor Department says prices rose three-tenths of a percent.[39] The Labor Department reported yesterday (Wednesday) that consumer prices rose 0.3% in March after a stagnant February.[10] SOUR homebuilders in the United States retreated further in March, sending construction to the lowest in 17 years, while consumer prices and industrial output rose mildly.[17] On a monthly basis, consumer prices rose 0.4% in March, down from 0.7% recorded in the previous month.[14]

On a monthly basis, consumer prices climbed 0.4% in March, down from 0.7% recorded in February.[14]

Prices for foods and beverages, which have soared last year, have decelerated in 2008. They declined again in March, as consumers paid less for dairy products, alcoholic beverages and breakfast cereals.[24] Over the past year, Chicago-area prices rose more than the city index. The nationwide March numbers matched what economists were expecting, according to surveys conducted by both the Wall Street Journal and Bloomberg.[18] Prices in the local area rose 4.5 percent since March 2007, outpacing the overall city index average which rose 4 percent.[18]

Prices rose 4 percent in the 12 months to March, after a year-over-year gain of 4 percent in February.[19]

The energy commodities area, which is based on prices of petroleum-based products, rose 2.0 percent.'' This area continues to be driven by the high price of crude oil, which was trading near $115 a barrel Tuesday afternoon.[18] One of the day's biggest bombshells came when Energy Department data revealed a surprising draw down of 2.3 million barrels in U.S. crude stockpiles. With the price of oil already hitting a record high despite predictions the data would reveal a build of a few million barrel, the crude for May extended its all-time highs to peak at $114.95.[6] American Airlines AMR, the parent of American Airlines, has reported a first-quarter loss $328 million (£166.1 million), compared with a profit of $81 million last time, as the company grappled with soaring fuel prices. The Road Haulage Association has proposed the introduction of a fuel regulator that would stabilise the price that transport companies pay for their fuel. Japan Airlines International has agreed to plead guilty and pay a $110 million criminal fine for its role in a price-fixing scandal tied to air cargo shipments, the U.S. Justice Department said. Scottish & Southern Energy said that its renewable energy development arm, Airtricity, has entered into a 50:50 joint venture with Gothia Vind, the Swedish renewable developer, to create new wind farms in western Sweden.[9]

The drop in value of the U.S. dollar has generally lifted the price of consumer goods that are imports. These are hard times. All of these pressures help to explain why Wal-Mart???s latest financial report exceeded expectations. Consumers are on a hunt to find the lowest prices for their staples.[50] Economists say rising prices are acting as a tax that eat into consumer spending'''the force driving two-thirds of the U.S. GDP, the broadest measure of economic growth.[27] Inflation, in essence, may be bringing an end to the consumer spending boom, the main engine of U.S. economic growth for the past several years. David Rosenberg, North American economist at Merrill Lynch, said on Monday that the 64-quarter-old consumer spending spree did, in fact, end in the first quarter of this year.[43]

Excluding food and energy, the CPI is expected to have risen 0.2%. Because of inflation, Americans are not shopping the way they used to, according to Bespoke Investment Group, a research firm in Harrison, N.Y. They're digging deeper into their wallets for the bare necessities like gasoline, food and beverages, the sectors showing the most growth in retail sales, the firm said. "Unfortunately, growth in these sectors is primarily due to inflation in food and energy prices," Bespoke's Paul Hickey and Justin Walters said. The sectors selling discretionary items, like motor vehicles, building materials, general merchandise and clothing, showed the largest contraction of total share in retail spending, they said. Not surprisingly, consumer confidence is now at its lowest level in more than a quarter century, fueled by worries over inflation and jobs, the Reuters/University of Michigan Surveys of Consumers showed Friday.[43] Inflationists have been crying wolf for the past three plus years despite the fact that the annualized headline CPI, including food and energy, and not seasonally adjusted, for 12M, 6M, and 3M has fluctuated around the 20-year trend of 3%+- (yes, the annualized inflation in the U.S. for the past 20 years is 3.08%). Despite huge run up in crude oil and agriculturals during the past year the CPI rates in the graph are below their highs during 2005-07.[49] Upcoming event risk for Treasuries includes the release of U.S. CPI, and if the release indicates that the FOMC may be hesitant to aggressively cut rates in the face of building inflation pressures could weigh the contract down.[25] Risk trends will remain the biggest driver of day-to-day price action, but the upcoming release of the U.S. CPI data could weigh the DJIA toward 12,175, as the data will likely indicate that inflation pressures are building.[25]

The CPI is unquestionably one of the most widely recognized macroeconomic price indexes, running second only to the Dow Jones Averages in the price index popularity contest. It is used not only as an indicator of the price level and inflation, but also to convert nominal economic indicators to real terms and to adjust wage and income payments (such as Social Security) for inflation.[22]

"There are multiple channels that are creating inflation pressure,'' said Joseph Di Censo, a fixed-income strategist in New York with Lehman Brothers Holdings Inc., which participates in the surveys. Longer-maturity debt "is rich,'' he said. The UBS Bloomberg Constant Maturity Commodity Index gained 19 percent this year, compared with 22 percent in all of 2007.[32] The inflation rate in the region will stay above 6 percent in 2008, about the same as last year, the IMF said in a report released in Washington.[32]

China's savings surplus and America's savings deficiency largely determine our trade imbalance with China. The U.S. Treasury should have learned this lesson after years of forcing the Japanese to adopt an ever appreciating yen, which destabilized Japan's economy without doing a lick of good for trade balances. Until the Fed dumps inflation targeting and the U.S. abandons its weak-dollar policy, inflation will rule the day.[38] As former chairman Greenspan put it, "We face new challenges in maintaining price stability, specifically to prevent inflation from falling too low." (Given the U.S. economy's productivity boom, the Austrians viewed the prospects of some deflation as just what the doctor ordered.)[38] Factory activity was the only promising reading for the day with a 0.3 percent rise in industrial production through March. Any optimism that could have come from this minor indicator was quickly washed out by a Beige Book that reported a cooling in the economy through February, with a specific drop in employment, consumer spending and housing market activity. The stock markets advanced through the active session as Intel improved their forecasts for the second quarter and JP Morgan reported a slighter drop in earnings than analysts had forecasted.[40] The inflation pressures are occurring just as the economy seems to be sinking into a recession, with consumers cutting back on spending and the housing industry, where the biggest troubles started, sinking further.[23]

A few weeks back, I preached about how the Federal Reserve's actions were destroying our economy by rescuing our fellow Americans who engaged in greedy and detrimental activities. In the face of the gigantic financial mess we've created, however, our leaders have relaxed, sat back, and lowered rates, thinking they had an easy solution to a challenging problem. Well, their efforts finally shone through yesterday, in the inflation numbers that were released.[48] The closely watched index helps the Federal Reserve measure the rate of inflation.[7]

The Federal Reserve is expected to continue cutting interest rates in an effort to boost economic growth and employment.[39] Consumer spending accounts for two-thirds of economic activity. While the Bush administration is hoping that economic stimulus checks being mailed to households starting next month will make any slump short and mild, Zandi said the $100 billion in payments consumers will get this year will be just enough to offset their higher gasoline bills, leaving nothing left to boost consumer spending in other areas. In its latest look at business activity around the country, the Federal Reserve said Wednesday that "economic conditions have weakened," citing sluggish consumer spending and rising costs to businesses for raw materials.[13] San Francisco Federal Reserve President Janet Yellen said Wednesday that the U.S. economy has 'all but stalled' and 'could contract' in the first half of the year. Yellen spoke at the Bay Area council's annual outlook conference, discussing the 'turmoil' in the financial markets over the last nine months and how she believes Federal Reserve action and the economic stimulus package will go a long way towards boosting the economy.[6] "I'm not ruling out a recession," the president of the San Francisco Federal Reserve Bank, Janet Yellen, told reporters after delivering a speech in Alameda, California. She said the U.S. central bank's the policy-setting Federal Open Market Committee must be "prepared to act in a timely manner." Yellen is not a voting member of the FOMC this year. Others agreed a downturn seemed to be intensifying. "These housing starts suggest that the pace of decline is intensifying, which is the last thing the U.S. economy needs right now," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto.[33]

Production at factories, mines and utilities rose by 0.3 per cent, after a revised 0.7 per cent drop in February, according to the U.S. Federal Reserve. The Reserve Bank of India, the country's central bank, is evaluating the creation of a sovereign wealth fund as it seeks to reap greater returns from its burgeoning $300 billion (£151.9 billion) of foreign exchange reserves. UBS is forcing its investors to accept shares as a cut-price dividend instead of its usual cash payout just days before the loss-making Swiss bank asks shareholders to buy into an emergency SwFr15 billion (£7.5 billion) rights issues to prop up its balance sheet. Alliance & Leicester Moody's, the ratings agency, has cut Alliance & Leicester's long-term credit rating one notch to A1, citing funding concerns and a drop in the value of some of its treasury investments.[9] The markets will also hear from the Federal Reserve, as people try to handicap the likelihood of a further rate cut at the central bank's next meeting.[21]

Federal Reserve Chairman Ben Bernanke said as much earlier this year, acknowledging that the central bank's job is even more difficult, especially compared with the last recession in 2001, when the tech-stock bubble burst and investment declined. "In this case, the consumer is taking the brunt of the effects" of the current downturn because housing wealth has been tied strongly to spending and Americans' homes are their biggest assets, Bernanke said.[43] The data did little to rattle equities markets, with analysts saying that the problems in the embattled housing sector have been baked in already. Later in the day, the Federal Reserve released its report on industrial production and capacity utilization in the month of March on Wednesday, showing that industrial production unexpectedly increased compared to the previous month.[6] The data is likely to add to recent concerns about the outlook for the housing market, partly offsetting some of the recent optimism that the market is close to a bottom. The Federal Reserve released its report on industrial production and capacity utilization in the month of March on Wednesday, showing that industrial production unexpectedly increased compared to the previous month.[26]

The Federal Reserve Bank of New York reported that regional manufacturing rose slightly in April after shrinking rapidly in March.[44] WASHINGTON (AP) — A new Federal Reserve report says the country's economic health deteriorated further in the early spring.[51] Economic conditions have weakened almost across the board in the past six weeks, according to the "beige book," a compilation of anecdotal reports about business conditions from around the United States prepared by the Federal Reserve.[3]

Recent inflation reports have underscored the challenges for the Federal Reserve.[11] Giving the Federal Reserve more scope to ease policy in a fortnight have been the latest inflation figures.[45]

The situation contradicts conventional economic thought and is stoking fears that the Federal Reserve'''s recession antidote'''federal funds rate cuts'''may produce lingering side effects.[27] Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech Wednesday that the economy "has all but stalled and could even contract over the first half of the year."[36] The president of the Philadelphia Federal Reserve Bank, Charles Plosser, said in Blue Bell, Pennsylvania, that the economy "feels pretty bad" whether or not a recession is declared.[33]

All of which could spell more trouble for consumers in the coming months. Tax filers this week can look forward to some relief from a massive government rebate program. That one-time shot in the arm won'''t help consumers ''' or the economy ''' if energy and food prices keep rising. [28] Rising prices for such staples as food and energy are finally taking a toll on the U.S. consumer.[43] Consumers in North County and across the nation are paying rising prices for a range of items, and particularly for food and fuel, the U.S. Labor Department reported Wednesday morning.[23]

The Dow Jones industrial average rose 256.80 points Wednesday to close at 12,619.27. Zandi said the rise in food and fuel prices has been a significant drain on consumers' purchasing power, another reason he and other analysts believe the country has fallen into a recession.[13]

Core commodities prices are flat from a year ago as few of the producer pipeline pressures are being carried over to the consumer. Upward surprises will continue to dampen the equity markets as they argue for the Fed to hold back on the current easing policy cycle.[30] 'For the Fed, core prices, which exclude food and energy, are edging up but remain at what I consider a reasonable level,' Naroff said.[26]

The hope is that higher food and energy prices haven'''t yet spilled over into the prices of other goods. If you break down the list of those goods, the price increases have been mildest in so-called capital goods ''' business machinery and equipment.[28] The modest increase, which matched economist estimates, came as the sharp rise in energy prices was partly offset by a steep drop in apparel prices.[26]

A 1.3 percent drop in apparel prices helped to offset the sharp rise in energy prices, with apparel prices falling for the second consecutive month.[26] The 19% year-over-year rise in energy prices reflects the stronger global demand driven by China, India and other developing countries. Food prices are rising given both global demand and their increased usage as alternative bio-fuels.[30] Food prices are up 4.4% in the past 12 months, while energy prices have shot up 17%.[10]

The higher energy prices helped lift the shares of Exxon Mobil, Repsol, BG Group and Petrobras, and with them, stock market indexes.[44]

U.S. stocks rose modestly, helped by gains in the energy sector on record oil prices and after stronger-than-expected results from U.S. regional banks lifted the financial sector.[44] "One thing that is clearly driving the oil price is that the U.S. dollar has gotten substantially weaker in the past several months and quarter," said Richard Batty, energy analyst at Standard Life.[44] The Canadian and Australian dollar also weakened against the U.S. dollar amid oil prices hitting a new record high of $113.99 a barrel.[16] Crude oil prices hardly blinked after the report and''closed at''a fresh record high in New York Wednesday of $114.93 amid concerns that the dollar will continue to weaken against the Euro.[27]

While heating oil prices climbed 10.1 percent, prices at the average price at the pump was $3.40 a gallon, or $0.55 more than a year ago, according to the AAA.[34] Prime Minister Gordon Brown of Britain urged members of the Organization of the Petroleum Exporting Countries to lift production to counter rapidly rising oil prices, which have shot up 80 percent since a year ago.[44]

New home construction fell twice as much as expected during March, to the lowest level in 17 years, the Commerce Department reported. Economists had been expecting a drop of about 5 percent in home starts, but they fell 11.9 percent. [4] In other economic news, housing starts fell sharply in the month of March, according to a report released by the Department of Commerce on Wednesday, with the decrease exceeding economist estimates.[26]

Housing starts plunged 11.9 per cent to a seasonally adjusted 947,000 annual rate - the lowest since 921,000 in March 1991, the Commerce Department said overnight.[17] U.S. Commerce Department figures showed housing starts across America plunged 11.9 per cent in March, sinking to the lowest annual total since 1991.[45]

Building permits also fell, dropping 5.8 per cent to a 927,000 annual rate - a signal housing starts will keep going down.[17]

New construction of single-family homes fell in March by 5.7 per cent to a 680,000 unit rate, the lowest since January 1991.[9] Action Economics continues to expect existing home sales to fall by 1.2% to a 4.960 million-unit annual rate in March and new home sales to fall by 0.3% to a 0.588 million-unit pace.[11] Work began on 947,000 homes at an annual rate, down 11.9 percent from February and the fewest since March 1991.[19]

On an annual basis, the pace of wholesale price growth accelerated to 6.9 percent in March from 6.4 percent in February.[26] Apparel prices have declined for two months -- 0.3 percent in February and 1.3 percent in March.[42]

With new housing starts lower than since 1991, rent prices jumped 0.2 percent, double that in February.[34] New vehicle prices dropped 0.1 percent and clothing costs declined 1.3 percent, the biggest decrease since 1998.[19] The cost of medical care rose 0.1 percent for a second month. The Fed has lowered its benchmark rate 3 percentage points since September, to 2.25 percent, and investors are betting officials will lower the rate by at least a quarter percentage point when they next meet on April 29-30.[19] The Fed'''s policy accounts for 90 percent of economic thought, said Laurenti who does not subscribe to the theory himself. Today'''s climate '''could make a strong case for the Austrian theory,''' he said. Because of the commodity speculation added into the mix by investors, commodity prices '''could completely collapse,''' Laurenti said, and return to their pre-inflationary prices, especially if the cheap credit continues to flow. '''It'''s exactly what we have seen again and again,''' he said.[27] Late Wednesday, the Fed'''s regional Beige Book survey of economic activity confirmed that '''most manufacturers have or are planning to increase prices in response to rising input costs.'''[27]

If the CPI reports are released in line with expectations, Treasuries, the U.S. dollar, and U.S. stock markets may simply trade quietly until the release of the Fed's Beige Book at 14:00 EDT. As a summary of economic conditions throughout each of the 12 Fed districts, the report could give key insight into how the FOMC will vote on April 30.[25] If U.S. CPI is surprisingly soft, the markets may take the news as a green light for the Fed to continue slashing rate, which could propel the pair up to the record highs once again. Will the Euro stick to its uptrend? Discuss the topic in the DailyFX EUR/USD Forum. The Dow Jones Industrial Average finally broken out of its tight range last week, only to return to a different once.[25] Over the first quarter of the year, the core CPI is up at an annual rate of 2%, at the upper end of the so-called "comfort zone" of a 1 to 2% rise in that reading that the Fed is believed to want to see.[35] Core CPI grew 2.4% on an annual basis, which means that inflation is running 'hotter' than the Fed wants to see it.[47]

Concerns of rising inflation remain high, but recent core gains remain moderate. If inflation expectations are kept under control by such evidence, then the Fed has a freer hand to cut rates," said Stephen Gallagher, an economist at Societe Generale.[2]

'Food and energy inflation is a significant global problem made worse in the U.S. by the weakness of the dollar,' said Chris Low, Chief Economist for FTN Financial.[26] Monthly inflation estimates in a Bloomberg News survey of 78 economists ranged from gains of 0.2 percent to 0.7 percent.[19] The federal government'''s stimulus package, passed in February, aims to stimulate consumer spending with tax rebate checks of $600 to most individual taxpayers and $1,200 to married taxpayers. Economists say it may not work in this downturn because of the offset from inflation.[27]

Since last week's letter June Gold has continued to rise and has just hit 952.7. My stance on inflation has not changed and I expect to see gold prices get back over $1000 an ounce again this year.[47] The rapid urbanization of the country is pulling in raw materials for construction and other infrastructure, while a more affluent workforce is buying increased amounts of imported food. On the other side of the world, the European Union's statistical agency Euorstat reported that annual euro inflation for March rose 3.6%, its most rapid rise in 16 years.[31] The news-flow out of the Euro zone was dominated by the release of Eurostat data showing that Euro zone annual inflation rose to 3.6% in March, revised up from 3.5% estimated earlier.[6]

Treasuries, which tend to perform best when the economy and inflation are slowing, lost 1.24 percent on average since March 17, according to Merrill's indexes.[32] A very high rate of growth in the household debt, mostly via loose mortgage lending, became necessary to support the controlled inflation regime since 2002 and to artificially boost the economy for political purposes.[49] Inflation rate lags the economy and there is nothing like a severe recession to bring the headline CPI rate crashing down.[49] The move came after the National Bureau of Statistics reported that China's CPI was up 8.3% in March, while the inflation rate for the first quarter stood at a worryingly high 8.0%.[31]

Eurozone inflation jumped 1% from February to March and 3.6% from 2007. If the ECB continues to hold its rate steady at 4%, then the discrepancy between the banks' lending rates could further widen the gap between the dollar and the euro.[10]

Excluding volatile fuel and food costs, the "core" inflation rate was far more muted.[29] WASHINGTON (AP) — Inflation rose again last month, reflecting big jumps in the cost of energy and airline tickets.[13]

Most analysts believe energy costs will keep rising to reflect the large jump in the price of crude oil, which has scaled higher than $114 per barrel.[10] The CPI showed a 1.9% jump in energy costs, with gasoline prices up 1.3% and natural gas prices up 4.6%.[10]

Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.[19]

The markets are already well aware that expansion has slowed dramatically, and the jump in Tuesday's producer price index reflects rocketing costs at the factory gate. Is this trickling down to the consumer level? Traders will find out on Wednesday.[25] Analysts are expecting that trend to show up in the Consumer Price Index due out Wednesday.[28] The harmonized index of consumer prices climbed 0.8% from the prior month and moved up 3.5% annually.[14]

On a monthly basis, consumer prices were up 0.8%, faster than the 0.6% forecasted by analysts.[14]

On the overnight session on the Sydney Futures Exchange, the Share Price Index 200 contract closed up 150 points at 5,640, in a surge of 2.7 per cent. [45] On the New York Stock Exchange, the Dow Jones industrial average surged 257 points higher to 12,619, in a gain of almost 2.1 per cent.[45]

Ofcom, the telecoms regulator, has published proposals to promote the next generation of broad-band networks for new housing and offices. Tiscali, the Italian telecoms and internet service provider, saw its shares rise by 10.5 per cent to €2.32, giving it a market value of about €1.3 billion (£1.05 billion), on reports that it has set a deadline for nonbinding offers.[9] A more favourable report on the economy showed industrial production in March climbed unexpectedly, up 0.3 per cent.[17]

The EIA estimates drivers will spend $3.54 per gallon on gasoline during the peak driving months, 61 cents higher than last year. '''The report was rather bearish for prices,''' said Eric Wittenauer, futures analyst for Wachovia Securities LLC. He said OPEC countries have exhausted their spare capacity, and global demand is expected to increase this year, thereby canceling out the U.S. decline.[27] The international price of oil has just climbed to a record-high $114 U.S. per barrel.[50] Given the high price of Crude Oil, the sagging U.S. Dollar and the strength in outside world economies, I continue to like the prospect of higher gold prices this year.[47]

The increase, led by gasoline and home heating oil prices, was twice what economists had expected.[44] With the price of oil hitting triple-digit record highs last month, few economists were surprised by the increases.[24]

There were slight increases in the cost of housing, with prices of rents, heating oils and utilities accelerating from February.[24] Although vehicle prices fell 0.1 percent, airfares climbed 3 percent as airlines struggle to cope to sky-high fuel costs.[34] Higher fuel costs generally are having a wider impact on the economy than just on retail sales. A number of (so far smaller) airlines have had to seek bankruptcy protection because they are being squeezed by higher costs, reduced travel and tighter safety measures. This is reminiscent of other times in the past when jet fuel prices skyrocketed.[50] The dire straits of the housing sector don't provide any new information to the equity markets, but an outsized decline will heighten concerns for the near-term economy, which is already struggling under high energy costs, tightened credit, falling confidence and the fear of recession.[30] Gasoline and other energy costs continued to be the prime culprit, rising 17 percent over the year.[23]

The trend has produced bizarre scenarios that have investors puzzled. Last week, the Energy Information Administration released its estimates for gasoline prices this summer. Even factoring in a decline in demand and a 15-year high in inventories, the EIA said gasoline prices are expected to be 21 percent higher this summer than in 2007.[27] Food prices increased 0.2 percent for the month, after a 0.4 percent rise in February.[42] Food prices rebounded by 1.2 percent after falling 0.5 percent in the previous month.[26] In the last three months, gasoline prices are up by a third and food prices are up 10 percent.[28] Paul Sakuma / AP In the last three months, gasoline prices are up by a third and food prices are up 10 percent.[28]

Food prices rose 0.2% in March, half the 0.4% rise of the prior month, while year-over-year food prices are up an unadjusted 5.3%.[37]

Residential natural gas prices were up 4.2 percent on the month and residential electric power rose 1.1 percent.[1] Producer, or wholesale, prices, meanwhile rose a lot faster _ by a whopping 1.1 percent.[36]

The retail price index, excluding mortgage interest payments rose at a slower pace of 3.5% compared with 3.7% in the prior month.[14] The report showed that the general business conditions index rose to a positive 0.6 in April from a negative 22.2 in March, with a positive reading indicating growth in the sector.[14] The statistical office also stated that industrial production rose 17.8% in March, more than the 16.5% growth expected by economists.[21] The Fed snapshot "either portrayed a slowdown in already subpar economic growth or a deepening recession," said Michael Gregory, economist at BMO Capital Markets, who predicted a quarter-point rate reduction.[36] Briefing.com's outlook for core inflation remains tame given the weaker economic growth that is expected over the coming quarters.[30]

An economic downturn should reduce demand and prices, but inflation in 2008 is making its own bull run.[27] The Department of Communities and Local Government, or DCLG, reported UK's annual house price inflation slowed to 6.7% in February from 8% in January.[14] WASHINGTON (Thomson Financial) - Consumer inflation pushed higher in March after remaining flat in the prior month, the Labor Department said today.[41] Everyone's worried about inflation, and the Labor Department just released March numbers to help us assess where we are as a country.[52]

Across the Atlantic, UK annual inflation remained stable in March, lingering above the central bank target for the sixth straight month, an official report showed Tuesday. [14] According to the latest report, French annual inflation accelerated to 3.2% in March, higher than 3% predicted.[14]

As mentioned above, the report also showed that building permits fell 5.8 percent to an annual rate of 927,000 units in March from the revised February rate of 984,000 units.[26] With the monthly decrease, housing starts in March were 36.5 percent below the revised March 2007 rate of 1.491 million units.[26] Housing starts information is due out at 8:30 am Eastern Time as well. This measure of initial housing construction is projected to to slip in March from the annual rate of 1.065 million units recorded for the previous month.[21] Housing starts dropped to an annual rate of 947,000, seasonally adjusted, the lowest since March 1991.[24]

U.S. housing starts plunged 11.9% to a 0.947 million annualized rate in March, though after an upwardly revised 1.075 million pace in February (1.065 million before).[11] The U.S. housing starts and the industrial production reports-both for the month of March have also been scheduled for release in the New York session today.[21] The Commerce Department reported separately that housing starts in the U.S. dropped twice as much as forecast in March to a 17-year low.[19] Yesterday morning, the Commerce Department said that builders started 11.9 percent fewer units of housing last month than in February, a remarkable decline. The number housing starts, a particularly useful indicator of building activity, was down 63 percent last month from its January 2006 peak, according to an analysis by consulting firm Global Insight.[3]

The Midwest saw the biggest decrease, with housing starts in the region falling by 21.4 percent in March.[5] Housing starts were 36.5 per cent below the level of construction in March 2007.[17] Capacity utilisation for all industries rose to 80.5 per cent in March from 80.3 per cent.[17] Excluding bonuses, the rate rose to 3.8 per cent -- the highest since November 2006. Mortgage funding It is understood that the Treasury is close to clinching final proposals in a scheme expected to lead to banks swapping their mortgage-backed assets in exchange for government bonds rather than cash.[9] Average earnings rose an annual 3.7 per cent in the three months to February, down from an upwardly revised 3.9 per cent increase in the three months to January.[9] Vivendi will have a 52 per cent stake in Activision Blizzard, the new company, which will have annual revenue of $3.8 billion.[9] Imperial Energy, the Russia-focused oil production group, has revealed increased oil reserves during 2007 alongside details of a planned $600 million (£303.9 million) rights issue. Rio Tinto, the Anglo-Australian mining group, said its iron ore sales had reached record levels in the first quarter although production was lower than in the final quarter of 2007 after its Western Australian operations were disrupted by cyclones and power shortages. JJB Sports is cutting 800 jobs after seeing its full-year profits fell by almost 30 per cent. The sports-wear retailer, which has been hit by England's failure to qualify for the Euro 2008 football championships, said that it had no alternative but to close 72 of its 420 stores.[9] Sales of new homes have fallen 29.8 per cent in the past year, the latest figures show.[17] Ladbrokes plans to open up to 70 outlets by the end of the year, mainly in bingo halls and arcades, using the Sportium brand. Principal Hayley, the hotel and conference venue operator which is controlled by Permira, is to enter the Spanish market this autumn when it opens La Mola Conference Resort & Spa, near Barcelona. Top Ten Holdings, the troubled bingo club operator, has reached agreement with Royal Bank of Scotland over a new facility involving the conversion of £12.8 million of debt into a mezzanine loan and a warrant to subscribe for 10 per cent of its shares at 20p any time over the next five years.[9]

Woolwich, the mortgage arm of Barclays, the banking group, will increase mortgage rates for buy-to-let investors. They will now have to pay a 1 per cent fee, equivalent to £1,500 on a £150,000 loan, to be put on a Woolwich Standard Variable Rate.[9]

Medical care prices increased 0.1 per cent, while clothing prices fell 1.3 per cent.[17] SABMiller, the brewer, reported comparable volume growth of just 1 per cent in the fourth quarter, although the group insisted that it was a resilient performance in the face of strong comparatives and it expected full-year earnings to be at the top end of expectations.[9] The expected 0.2% rise in the core component leaves an uptick to a 2.4% annual growth rate -- up from the 2.1% lows of August and September.[30] The new rate will come into effect on April 25, after the release of the growth data. This is the third hike this year.[21]

Lowering rates does very little to convince lenders to lend," Naroff pointed out. The housing market is expected to buck up later this year as a result of the rate cuts, but also due to a giant 168-billion-dollar economic stimulus package backed by President George W. Bush.[15] Help is on the way. Relief will come in at least three forms: (1) interest rates have been cut and this will ease both existing and future financing commitments; (2) the federal government'''s tax rebate cheques will be sent out in May; and (3) housing starts appear to be stabilizing and even a period of little or slow gain will be much superior to the recent history of declines.[50] The Fed'''s interest rate cuts, which have given commodities '''the green light''' to continue rising, is '''an unsustainable path in the long run,''' Flynn said.[27] Many analysts expect the Fed, which has been aggressively cutting interest rates and shoveling money into the banking system to combat the credit squeeze, will cut rates again when officials next meet on April 29-30.[13]

Then and as expected Fed will adjust the interest rate to suitable level,represented of increasing current rate, which directly change investors tendency to get the maximum utilization by invest available funds at different financial institutions. As a result investors willing to invest their funds on stock market will decrease and pull indexes down.[22]

'''''The Real Business Cycle: When an economy suffers an '''exogenous''' shock, one that severely disrupts markets, demand declines, and interest rate cuts make more funds available to offset the falling demand.[27] Anticipation of U.S. interest rate cuts and solid corporate profits sparked a powerful rally on Wall Street overnight.[45] The hike will also blunt the prospects for a near-term cut in interest rates by the European Central Bank.[31]

The central bank had raised banks' reserve requirement ratios 10 times in 2007 and the interest rate in six instances since early 2007.[21]

One wonders what the Fed and the USG were doing. Isn't it amazing that these things get worse over time in subsequent cycles? Crooks learn from history (how to do it) and the general population doesn't! Bubbles are superb lubricants for fraud. It is the Debt, Stupid! (That will dictate the direction of the inflation rate). [49] Delaying rate increases for too long would be harmful if the Fed '''waits to see the whites of the eyes of inflation.'''[27]

"The lack of any worrisome developments on the inflation front leaves the Fed room to address downside risks to the economy when it meets in April," said Michelle Girard, an analyst for RBS Greenwich Capital.[17] "Economic conditions have weakened," the Fed report stated. Many analysts believe the economy has fallen into a recession, predicting that economic activity contracted in the first three months of this year and is still ebbing.[36] Even Fed Chairman Ben Bernanke recently acknowledged for the first time that a recession was possible. That was a rare utterance of the "r" word for a Fed chief. The government later this month will report on the economy's first-quarter performance.[36]

The Fed, which has been cutting rates since September to bolster the economy, turned much more forceful in January, when conditions took another turn for the worse.[36] As the mediator of the discount rate, the Fed holds a powerful tool in helping to keep our economy in check.[48]

The economy is slowing across the nation, the home-building sector is tanking more than even the pessimists could have imagined a few months ago and prices keep rising at an uncomfortably high rate.[3] Even though prices our up, our economy continues to grow. I say consumers should continue to budget carefully and save for a rainy day as much as they can.[52] A flurry of reports on Wednesday revealed a dampened economy that is limping its way through a broad-based downturn, as consumer demand softens and the labor and housing markets continue to struggle.[24] According to the latest labor force statistics, retail employment currently stands at almost exactly the same level as it was in March of last year, further confirming the softness on the consumer spending side. Another explanation can be found in housing markets. They have been in chaos for two years now.[50] Consumer spending accounts for two-thirds of economic activity. While the Bush administration is hoping that economic stimulus checks being mailed to households starting next month will make any slump short and mild, Zandi said the 100 billion in payments consumers will get this year will be just enough to offset their higher gasoline bills, leaving nothing left to boost consumer spending in other areas. The Associated Press contributed to this article.[23]

The Chicago area, including Gary, Ind., and Kenosha, Wis., saw the largest increase in prices over the last year, compared with New York and Los Angeles. [18] In recent years producers have found it tough to obtain higher prices from grocers and retailers, and the result has been a squeeze on the manufacturers' profit margins. As the producers' cost pressures mount, their effort to raise retail prices will meet even more resistance.[29] In calculating wholesale prices, the government asks survey participants to report costs as of the Tuesday of the week that includes the 13th.[19] Static income coupled with escalating costs doesn't make for a good situation, and it means I'm going to need that government cash to sustain my everyday basic lifestyle. We saw in the March sales report that even some of the strongest retailers posted double-digit declining comps, but when it's all said and done, there won't be much left over from our checks for purchasing a new gadget at Best Buy (NYSE: BBY ) or Apple (Nasdaq: AAPL ) for "stimulation" purposes.[48] The reality is that food and fuel are essentials, so the 1.2% rise in food costs in March and 1.3% jump in gas is likely to sting the average consumer.[48]

The core CPI, which excludes energy, food, alcoholic beverages and tobacco moved up 1.2% annually in March.[14] Core CPI, which excludes the volatile food and energy sectors, is projected to edge up by 0.2% in the month.[21]

The global problems of food and energy are beginning to percolate violently as rice prices surge to all time highs for the second straight day. [31] The commodity inflation has already forced businesses to raise prices, Laurenti said, specifically small companies that do not have the economies of scale to weather rough times.[27] A weak dollar tends to raise prices for commodities denominated in that currency by increasing the spending power of other currencies and by attracting investors seeking to protect themselves from inflation.[44] April 16 (Bloomberg) -- Government bonds will decline in the Americas, Asia and Europe over the next six months as record prices for everything from oil to rice spark faster inflation, a survey of Bloomberg users showed.[32]

Oil prices struck fresh record peaks Wednesday as a key oil futures contract, traded in New York, briefly hit an all-time high of 115.07 dollars a barrel.[15] A gallon of unleaded gasoline hit a nationwide average of $3.386, according to AAA and Oil Price Information Service.[7] The spot price of West Texas crude oil rose $US1.30 to $US114.80 a barrel.[45]

Gasoline prices rose 5.2% after a 2.0% February decline and are up 26.0% from a year earlier.[11] The price of gasoline as a sub-component of the CPI has risen 32.7% year over year.[50] The headline numbers: The overall change in the CPI tells us how much prices have changed since last month and last year.[4]

The release of the CPI on Wednesday followed a spike in the Producer Price Index released Tuesday.[18] Of the core index, prices have risen the fastest in the transportation sector.[18] Over the past 12 months the core index has risen by 2.7 percent, a level surpassed only twice (in May and July 2005) in the past dozen years.[29]

The core rate increased 2.4 percent from March 2007, after a 2.3 percent year- over-year gain.[19] Energy services saw the highest increase, growing at an annual rate of 12.8 percent. This is more than triple the rate that the same area grew during all of 2007.[18] Mesirow'''s CPI estimate for March was a 0.4 percent increase over February and a 4 percent increase from March 2007.[27] The unexpected increase in industrial production came amid a rebound in the output of utilities, which jumped 1.9 percent in March after falling 3.6 percent in the previous month.[26] The Fed also reported Wednesday that industrial output managed a 0.3 percent rise in March but the gain in manufacturing was a weak 0.1 percent as auto production continued to fall.[13] Favorable results from Intel Corp, JPMorgan Chase & Co helped. A third report on Wednesday, from the Fed, showed industrial output unexpectedly rose in March as higher production by utilities offset weakness in manufacturing.[33]

The Fed also said that capacity utilization edged up to 80.5 percent in March from a revised 80.3 percent in February.[26]

The housing bubble postponed the deflationary depression of the Longwave and its burst will usher in the inevitable. The incessant interventions from the Fed and the USG will dampen the severity but they will also prolong the depression by postponing the adjustments that need to take place, especially, 30-50% drop in home prices, nationally, and more in the bubble areas.[49] As investors have fled from stocks and housing, Achutham said food and energy commodities have been serving as the '''safe haven where liquidity, offered by the Fed, is dumped.''' Hedge funds and other large investors have recalibrated their strategies toward copper, steel and oil adding '''speculative demand on top of the real demand.'''[27] The Fed has lowered benchmark borrowing costs by three percentage points since mid-September, trying to ward off spreading weakness from the deep housing downturn and a related drying up of credit.[33] The central bank may push lending rates at least 2.5 percentage points higher, said Alexandre de Azara, chief economist at GP Asset Management Inc. in Sao Paulo, who participated in the survey. The International Monetary Fund urged governments in Latin America and the Caribbean to make a priority of addressing the rising cost of fuels and essentials because they risk sparking social unrest.[32] Economists said weak labor market conditions in the United States are helping to contain wages and offset a jump in global commodity costs which have triggered inflation fears.[15] Some of the key factors to watch will be employment, consumption, and inflation data, especially as labor markets have deteriorated and Monday's Advance Retail Sales report showed that spending has increased purely on the back of gasoline receipts. What other economic releases should you be watching this week? Find out in the 5 Most Important Events for the Forex Market.[25]

The market is focusing on positive earnings news, helping along by relief that there were no big surprises in today's consumer inflation report.[4] All the details are in our Power Plays Report. This entry was posted on Wednesday, April 16th, 2008 at 11:22 pm and is filed under Inflation, Top News. You can follow any responses to this entry through the RSS 2.0 feed.[10]

The EUR/USD pair continues to consolidate within an ascending triangle, suggesting some potential for a break higher to test at least 1.60. This particular consolidation period could last for weeks or months, but in the near term, the U.S. dollar could advance as U.S. CPI is anticipated to reflect mounting inflation pressures. [25] "Core" CPI is a more stable number. It also provides a better idea of how broad-based inflation really is.[4]

Core inflation rose at 2.0% annual pace in the first quarter, the slowest pace since May.[37] On a seasonally adjusted basis, overall inflation rose at a 3.1 annual pace in the last three months.[41]

Real average weekly earnings, which are adjusted for inflation, rose 0.2 pct in March, while average hourly earnings, which are not adjusted for inflation, rose 0.3 pct in the month.[41] The PPI, which measures inflation pressures at the wholesale level, leapt 1.1% in March after a 0.3% increase in February.[10] Overall inflation is up an unadjusted 4.0 pct in the year ending in March, matching the 12 months through February, but slightly off the two-year high of January.[41] UK annual inflation remained stable in March, lingering above the central bank target for the sixth straight month.[14] Euro zone annual inflation accelerated to 3.6% in March, revised up from 3.5% estimated earlier, the Eurostat indicated today.[21]

Unexpected fall in German ZEW Economic Sentiment Indicator and a weaker-than-expected UK annual inflation were in the focus.[14]

Leading news from the euro zone was the surprising drop in German ZEW Economic Sentiment Indicator due to extraordinarily high price pressure in the country.[14]

Austrian economists warned that price level stability might be inconsistent with economic stability. They placed great stress on the fact that the price level, as typically measured, extends only to goods and services.[38] A monthly survey by the Center for European Economic Research, or ZEW, found that German economic sentiment dropped to minus 40.7 in April from minus 32 in March., while economists had expected the index to climb to minus 30.[14] The increase came as a surprise to economists, who had expected production to fall 0.1 percent.[26] The 1.1 percent month-over-month upturn was roughly double the 0.5 percent rise economists had been anticipating, and it comes on the heels of a 0.3 percent increase in February and a 1.0 percent increase in January.[29]

The report showed that industrial production increased by 0.3 percent in March following a revised 0.7 percent decrease in February.[26] Several other economic reports that include Q1 GDP, March CPI, industrial production and the retail sales, which were released today from China likely influenced the trading.[21]

The CPI measures the average price change in a basket of goods and services that the typical household likely buys monthly, excluding income taxes, stocks, bonds and life insurance.[7] FYI: The CPI doesn't do a very good job measuring changes in the cost of living. That's because it doesn't account for consumers changing their buying habits -- substituting less-expensive items for more-expensive alternatives.[4] A falling dollar increases the cost of the steady stream of imported consumer goods made overseas. As the dollar falls, it takes more of them to buy goods priced in stronger currencies.[28]

Alan Greenspan's lengthy span of "free money" instigated the housing bubble, and Ben Bernanke's reaction to the bubble's collapse is crushing the value of the dollar and has sent the cost of living on a steady upward march.[48] Economists have blamed rising fuel costs on the eroding value of the U.S. dollar.[23] Joel Naroff, chief economist at Naroff Economic Advisors noted that the modest increase came despite stories of surging costs all over the place.[26]

The average cost of regular gasoline, which rose to $3.40 yesterday, is about 55 cents higher than a year earlier, according to AAA.[19] Rice futures for May delivery rose yesterday the exchange-imposed daily limit of 75 cents, or 3.5 percent, to a record $22.17 percent.[32]

The benchmark 10-year U.S. Treasury note rose 10.2 basis points to 99 9/32, with the yield at 3.583 percent.[44] Rising inflationary pressures moved many investors out of the safe have of risk free bonds, and led to a huge decline in U.S. Treasury prices.[16] Prices are surging at a time when U.S. home prices continue to fall and the labor market shows signs of softening.[43] In uncertain times, people spend with greater caution. They become more conservative in their purchases, particularly with respect to big-ticket items (e.g., durable goods such as cars). In the last significant downturn in the U.S. economy, it took four years for total employment to return to its previous peak level.[50] Upcoming U.S. data is anticipated to suggest that the economy is facing one of the Fed's worst fears: stagflation.[25] In 2002 then governor Bernanke set off a warning siren that deflation was threatening the U.S. economy. He convinced his Fed colleagues of the danger.[38]

Looking ahead, the Initial Jobless Claims and Continuing Claim index will kick the New York session Thursday morning at 12:30 GMT. Attention will then shift to the Leading Indicators and the Philadelphia Fed index due at 14:00 GMT. Fed speak will also attract dollar traders' attention as market participants look for signs to the Fed's next move in speeches delivered by Kohn and Fisher. [40] "The trade-offs available to the Fed become less and less appealing," said Richard Iley, senior economist at BNP Paribas, a corporate bank and investment bank, in New York.[1] Many economists believe the Fed will lower rates yet again at the April meeting to help shore things up.[36]

Investors buying fed funds futures on the Chicago Board of Trade are pricing in a 100% chance of another quarter-point rate cut at that time, but only a 28% chance of a half-point cut.[35] Currently, fed fund futures are fully pricing in a 25bp cut to 2.00 percent on April 30 and a 30 percent chance of a 50bp reduction.[25]

Given the EU's current inflation readings, any idea of immediate rate cuts there look bleak and is at the heart of the Dollar break today. [47] The inflation rate is slightly smaller than the 8.7% growth marked in February, the highest since mid-1996.[21] Analysts take some comfort in the fact that the so-called '''core" inflation rate has ''' so far ''' remained in check.[28]

There was a very small increase in consumer prices: 0.3%. That figure means that for the last 12 months, inflation is up by 4%.[52] At 8:30 am Eastern Time, the government will release statistics about consumer inflation.[21]

Reports released Apr. 16 showed that consumer-level inflation remains steady, while the housing slump shows no signs of improvement.[11] The report also noted that inflation was picking up and that housing and credit conditions were worsening.[6]

"The retrenchment has been broadly based across hotels, clothing, autos, airlines, jewelry, appliances, restaurants, sporting goods, casinos and home improvement," Rosenberg said in a report. Just how bad inflation has gotten will be evident in two government reports this week.[43]

The number of new homes under construction dropped nearly 12 percent, while applications for permits for future projects dropped almost six percent. Some information for this report was provided by AFP, AP and Reuters.[39] Today's Housing Report showed Housing Starts and New Permits fell as expected. I do not expect to see a trend change in these two statistics in the near future.[47] Demand for homes has dropped so much that even the current depressed level of construction may be too much. "It's bad news as long as housing starts are falling less than demand," said Christian Menegatti, an analyst at RGE Monitor, an economics research firm.[3]

Actual: Housing starts dropped 11.9 percent, to an annualized rate of 947,000 units.[4] Briefing.com looks for a near 5% decline in March housing starts to an annualized rate of 1.015 million.[30]

A separate government report today shows the troubled U.S. housing sector got worse in March.[39] U.S. industrial production rose unexpectedly in March, the biggest increase since November.[9] U.S. industrial production rose 0.3% in March, better than the 0.1% expected decline, though after falling 0.7% in February (revised down from -0.5%).[11]

The net house price balance declined to minus 78.5 percentage points in March from a revised minus 65.7 percentage points in February. [14] The report, released Wednesday, says manufacturers and others businesses are being walloped by zooming prices for energy and other raw materials.[51] The report shows manufacturers and other businesses are being buried by high energy and raw material prices.[53]

The gain was exaggerated by high energy prices that elevated mining production and by more seasonal weather that boosted utilities.[17] The gain resulted from higher energy prices, which made the utilities' output appear higher.[3] Energy prices rebounded 1.9% after a 0.5% decline in February, and are rising at a 17.0% year-over-year pace.[11]

China's robust economic growth is one key reason for rising commodities prices. [31] Value of exports rose 10.9% year-on-year in February and that of imports climbed 5.3%. The International Monetary Fund, or IMF, expects Chinese economic growth to slow to 9.3% in this year from 11.4% recorded in 2007.[21] The institute said Malaysia would witness strong economic growth in the first half of the year 2008, after which it is expected to slowdown in the second half.[12]

In March, retail sales recorded an annual growth of 21.5%, higher than the 19.8% expected by analysts.[21]

In March the core reading was up 0.2 percent from February, in line with forecasts. [29] Even core CPI is anticipated to show a 0.2 percent rise for the month and a pick up in the annualized reading to 2.4 percent. If any of these figures surprise to the upside or downside, the markets will respond accordingly and the moves could be dramatic.[25] Rents which, make up almost 40 percent of the core CPI, increased in February.[19]

The data also pointed to a continuing deterioration in the housing sector as building permits fell 5.8 percent to the lowest since April 1991, when the economy was in recession. [33] "Today's news confirms a lot of what we've been hearing and how people have been feeling about the economy," said Mark Vitner, a senior economist at Wachovia.[3] Many analysts said construction is likely to fall more in coming months, reflecting a huge overhang of unsold homes that includes not only new homes but also houses being dumped on the market as foreclosures rise to record levels. David Seiders, chief economist at the National Association Home Builders, said he believed construction activity would fall to just 948,000 units this year, the third straight decline and the lowest level of activity in the post World War II period.[13]

Groundbreakings for new homes declined 12 percent, and permits dropped 6 percent, as builders grappled with fewer buyers and sagging inventories.[24] The Commerce Department said that new home construction and applications for permits to build new residential properties tumbled to a 16-year low in March.[15] A report from the ACEA showed that new passenger car registrations dropped 9.5% year-on-year in March in the total Europe, which refers to EU and EFTA together.[14]

Today's report showed energy expenses jumped 1.9 percent, the most since November, after a decrease of 0.5 percent the prior month. [19] '''When you have increases in the range of 10 percent, sooner or later that is going to show up in consumer prices,''' Laurenti said.[18] Diesel, which powers most delivery trucks, has risen by 37 percent, and several North County businesses that have had to pay larger fuel surcharges have begun passing the increase along to consumers.[23]

The securities market tumbled lower during the midday session as WaMu reported a $1.14B net loss in the first quarter, but consolidate the losses as State Street posted a 69 percent increase in net income.[16] Several profit warnings tempered U.S. equity market gains. The financial services firm State Street told investors it faced billions of dollars of unrealized portfolio losses, sending its shares 7 percent lower.[44] At about 7:00am AEST, it was was being quoted at 93.93 U.S. cents, 58.89 euros cents, 94.29 Japanese yen, 47.61 pence and against the New Zealand dollar was at $NZ1.185.[45]

Southwest Airlines Co., the biggest low-fare carrier, said on April 11 it raised round-trip fares by as much as $12, following a larger rival for the first time in boosting prices after jet-fuel reached a record. [19] Food and beverage prices gained 0.2%, as a jump in the price of fresh vegetables, baked goods, sugar and sweets were balanced by declines in prices for dairy and related products.[35] Eating at home is one of the best ways to offset the rising food costs, and by staying home you'll also save gas to help deal with the rising energy costs. Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.[52]

"Consumer spending was characterized as softening across most of the country, with some districts reporting year-over-year declines in retail and or auto sales," the Fed report said. [36] "Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' minutes of the Fed's March 18 meeting showed.[19] If the data does indeed suggest that the Fed will be less aggressive in cutting rates at the end of the month, EUR/USD could drop below near-term support at 1.5750 toward 1.5665/78.[25]

The buck fell to 1.5968 shortly after 8:30 am ET. The dollar plunged at around 5 am ET upon the release of hotter than expected euro zone inflation data.[6] "A credible case can be made that inflation is behaving as expected in a recession and starting to moderate," Bernard Baumohl of the Economic Outlook Group wrote in a research note.[24] Policy makers considered that "readings on inflation had generally been elevated,'' according to the minutes. "On balance, most participants still expected inflation to moderate later this year and in 2009.''[19]

In another reflection of the squeeze on ordinary Americans, the Labor Department said that average weekly earnings for nonsupervisory workers dropped by 1 percent last month, compared with a year ago, the sixth straight month that inflation-adjusted wages have fallen. [13] The surge in commodities has been fueled by the 14 percent drop in the Dollar Index since the start of 2007.[32] The FTSE Eurofirst 300 index of top European shares ended up 0.52 percent at 1,281.62 points.[44]

The index of expectations for 10-year Treasury yields rose to 55.65 for April from 48.38 in March.[32]

Investors became less bullish after the Federal Reserve supported JPMorgan Chase & Co.' s takeover of Bear Stearns Cos. on March 16.[32]

Economists had expected capacity utilization to remain unchanged compared to the 80.4 percent originally reported for the previous month. [26] Owners equivalent rent rose 0.2 percent, compared with a 0.1 percent gain the month before.[19]

SOURCES

1. NEXT UP-US PPI casts shadow over consumer inflation | Markets | Markets News | Reuters
2. AFP: US consumer prices rose modestly in March
3. Reports Offer Grim Picture of Economy - washingtonpost.com
4. Business 101: Consumer prices and home construction - New Jersey Local & Small Business News ' Economics & Finance News Articles - NJ.com
5. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
6. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
7. Ahead of the Bell: Consumer Price Index | Chron.com - Houston Chronicle
8. Rising US Food and Energy Costs May Lead To Extended Economic Slump
9. Need to know - Times Online
10. Inflation on the Rise with No End in Sight
11. Inflation Warms, Housing Chills in March
12. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
13. The Associated Press: March consumer prices up, reflecting higher energy prices
14. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
15. AFP: Further US rate cuts seen in wake of inflation, housing news
16. US Dollar Strengthens Across the Board as Producer Prices Jump
17. US house construction at 17-year low | The Australian
18. Energy, Food continue to inflate Consumer Price Index
19. Bloomberg.com: Economy
20. Fed: economy weakened further in the spring - Forbes.com
21. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
22. Consumer Price Index - Apr 16 - Forex News | IBT FX Center
23. GOV'T: Prices surge higher : North County Times - Californian
24. In Fed report, signs of continued weakness in U.S. - International Herald Tribune
25. Will US CPI Data Suggest That The Economy Is Heading for Stagflation?
26. Consumer Prices Show Modest Increase In March [] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
27. Fed tonic may be '''toxic''' as inflation looms over economy
28. Surge in energy prices stokes inflation - Eye on the Economy - MSNBC.com
29. Jump in price index may feed Fed's inflation hawks -- chicagotribune.com
30. Briefing.com: CPI and Housing Starts
31. Inflation Everywhere - Forbes.com
32. Bloomberg.com: Worldwide
33. Housing starts sag, core prices rise modestly - Reuters - National Business News - Portfolio.com
34. Consumer Price Index Rises On Higher Oil Cost | April 17, 2008 | AHN
35. CPI, core CPI both up in line with forecasts - Apr. 16, 2008
36. Fed: economy weakened further in the spring | Chron.com - Houston Chronicle
37. CPI Shows Inflation Is Still Chugging - Forbes.com
38. Panic Time at the Fed - Forbes.com
39. VOA News - Inflation Rises in US Economy, Home Building Falls
40. EUR/USD Steps Closer to 1.60
41. US March CPI up 0.3 pct, core CPI up 0.2 pct - Forbes.com
42. Consumer price index rises as expected - UPI.com
43. Consumer Spending Boom May Be Coming to End - Retail * US * News * Story - MSNBC.com
44. Oil gains push up energy shares and U.S. stocks - International Herald Tribune
45. Rate cut anticipation sparks Wall St rally - ABC News (Australian Broadcasting Corporation)
46. Free Preview - WSJ.com
47. Ira Epstein & Company Weekly Metal Report
48. Look What You Did, Bernanke
49. US Actual Inflation Trend Heading for Stagflation or Deflation? :: The Market Oracle :: Financial Markets Forecasting & Analysis Free Website
50. Job Losses, Higher Prices and Weak Housing Hammer Retail Sales » News | Reed Construction Data
51. The Associated Press: Fed: economy weakened further in the spring
52. Consumer price watch - WalletPop
53. Federal Reserve Says Economic Health Deteriorating

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