Prices pass through hard times

What about the prices in the US? The country is faced with difficulties and competition for some time. Because of the economic crisis, not only the US but the whole world is suffering severely by this financial trouble. The US is confronted with numerous problems, for instance the unemployment keeps increasing, the companies become bankrupt, the trade is declining and now, the prices are rising. But is this increase worse than we think?

In 2008, US prices rose hardly anything, so there was merely a gain of 1.8 per cent on the year. The increase was the first time in six months after the fluctuations in energy prices. Although an increase in prices grate on people their ears, it is of little importance. So the Consumer Price Index rose only by 0.3 per cent in January. Core price inflation, which excludes food and energy, rose by 0.2 per cent and is much higher in comparison with December. The energy prices also rose, yet still remained below the peak level in July 2008.
Petrol was the cause for the prices who were pushed higher. Moreover prices for transportation, medical care, apparel, food and education also rose last month. Another reason for the increase in prices is due to companies raising prices for the new year after offering deep holiday discounts.
So we can conclude that the rebound is unfavourable and deflation remains a risk. Wholesale prices were down by 1 per cent, which is a big annual decline since 2006 and forms a sharply contrast with consumer prices. Successful the US Federal Reserve reached to a solution quite recently, the establishment adopted an inflation target of 2 per cent, so there is less risk of deflation.

The whole story kicks up a dust, the ultimate consumer experiences everything intense. So when the media publishes such information, the crowd believes it is bad, even when it is not. They change their attitude and the economy suffers under it. My opinion is to stimulate plans the government enforced, to keep the inflation stable is an important target for the economy. There must be trade to have a healthy economy.

Written by Marie Maes

Source: The Financial Times - 20 February 2009
Article: US prices rise by 0.3% in January
By Alan Rappeport in New York