The Gasoline-Driver Inflation Hike

Tuesday, 29 Mar 2011 09:05 AM

By Larry Kudlow

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Last week, the Commerce Department revised real GDP up to 3.1 percent for the fourth quarter of last year. That was some cause for joy in the stock market. But today we saw a poor consumer-spending report for the month of February, which is picking up the rise in gasoline prices and the decline in consumer sentiment.

Real income after-tax — known as real disposable income — actually fell in February. But the inflation rate jumped 0.4 percent, which is almost 5 percent annually. And while real consumer spending did rise, over the past three months it has gained by only 1.4 percent annually.

The gasoline-driven inflation hike now puts consumer inflation as measured by the personal consumption deflator at 4 percent over the last three months. That’s higher than wage and salary income. So while energy prices are bulging along with food, real wages look to be falling — not a good combination.

So I repeat my Q1 caveat emptor.

Now, all may not be lost, because manufacturing production looks strong and job creation looks somewhat better. Housing, on the other hand, is still slumping. Some smart economists I know now think Q1 GDP could be less than 2 percent. But they expect a rebound in the spring and the rest of the year.

Well, maybe so. But a lot depends on gas and food prices and other inflation factors, and that in turn depends on the dollar. If the greenback keeps sinking and producer prices for businesses keep rising, then corporate profits may really disappoint along with the slide in real consumer spending.

How about flat-tax reform and a King Dollar linked to gold?

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

© Creators Syndicate Inc.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved