This morning is going to be a disappointment for some who were hoping that inflation was going to be much less hot than estimates. The July number for annualized CPI showed +5.6% inflation, which may be the highest number in more than 15 years after food rose 0.9% and energy rose 4%. Throw these in with a slowing and slowing economy and you have one key word coming more and more evident: STAGFLATION.
As far as the monthly numbers, the nominal CPI came out at +0.8% versusestimates of about +0.4%. The core rate, backing out food and energyand anything else the labor Department determines is volatile, came outat +0.3% versus estimates of +0.2%.
Real earnings also fell 0.8% for Americans, which means the standard ofliving is losing ground and means that we are getting less money in thepockets to pay for higher and higher priced goods.
To add salt on the wounds, weekly jobless claims are still coming in high. We saw 450,000 weekly jobless claims, although the prior week’s jobless claims were revised to 455,000 from 460,000 claims. The old rule of thumb is that anything over 400,000 jobless claims drives up unemployment each month.
It looks like it is time to make sure the couch is on good shape.
Jon C. Ogg
August 14, 2008
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