Yet more signs that the “mental recession” is a tad bit more than just a “mental” recession: wholesale inflation is now the worst in 27 years — and the dollar has dropped to new lows.
It’ll be interesting to see if the White House blames this on the Democratic Congress or if it’s painted as somehow part of a past “Clinton recession.” But the seemingly- unraveling strands come amid stories about the possibilities of more banks at risk of failing. Taken together, it isn’t a picture that instills confidence in the economy — or those who administer the government that sets the policies. Which means there could be continued political and Wall Street consequences.
The financial news today is not good:
Soaring costs for gasoline and food pushed inflation at the wholesale level up by a larger-than-expected amount in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
The Labor Department reported that wholesale prices jumped by 1.8 percent last month, the biggest one-month rise since last November. Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.
Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.
Meanwhile, the dollar continues to sink:
The dollar declined to a record low against the euro on speculation Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will say credit- market losses are hurting U.S. economic growth.
The currency also weakened to the lowest level in more than a month against the Japanese yen and to a 25-year low versus the Australian dollar on concern confidence in the debt of Fannie Mae and Freddie Mac will diminish even after the U.S. government pledged support for the two-largest buyers of home loans. The pound surpassed $2 for the first time since July 1 after U.K. inflation quickened to the fastest pace in at least 11 years.
“The markets are reacting negatively to the renewed credit crisis in the U.S. and that’s hurting the dollar across the board,” said Roberto Mialich, a Milan-based currency strategist at Unicredit Markets & Investment Banking, a unit of Italy’s largest lender. “The market is speculating that Bernanke will offer a gloomy outlook for the U.S. economy.”
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.