Inflation remains flat, retail sales improve
Consumer inflation remained essentially unchanged in March compared with February and retail sales rose slightly more than expected, providing some welcome spring news to a halting economy.
Inflation rose only 0.1 percent in March compared with February and was up a modest 2.3 percent compared with March of last year. If you remove the volatile food and energy prices, core inflation was zero, or unchanged, compared with February and up only 1.1 percent since March of last year.
This means prices for products are staying low for consumers, which is aiding the bump in retail sales.
In March, retail sales rose 1.6 percent, which beat expectations of 1.3 percent. Removing autos from the picture, retail sales rose 0.6 percent. Removing autos and gasoline, sales rose 0.7 percent.
The March number beat February retail sales, which rose only 0.5 percent, and makes for the third straight month of increases.
This is encouraging if slightly puzzling news for the economy. With unemployment still at 9.7 percent and likely to remain near 10 percent at least through the remainder of this year, this is a jobless recovery. Instead, it has become a spending recovery, which is good for the U.S. GDP, which is 70 percent based on consumer spending, but it could mean the consumers are putting purchases on credit cards, which is not a good thing and is one of the ways this nation plunged into the Great Recession.
The Federal Reserve has said it expects inflation to remain low for the foreseeable future, which is allowing it to keep interest rates at historically low levels. However, some economists expect inflation to begin rising, given the amount of money pumped into the system by the government in 2008, in its attempt to stem the liquidity crisis. The government counters by saying the economic slack in the system -- chiefly, high unemployment -- is keeping inflation low.
Later today, the Fed is expected to release its Beige Book, its eight-times-per-year anecdotal report on economic conditions in the Fed's 12 districts around the country. The last Beige Book offered some encouraging news on the economy.
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April 14, 2010; 8:46 AM ET
| Tags: Economy, Energy, Federal Reserve, Federal Reserve System, Gasoline, Inflation, Interest rate, Unemployment, consumer price index, core inflation, inflation
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