The Return of Stagflation

July 15, 2009

This morning, the government reported that consumer prices rose 0.7% last month. That's a pretty big gain and it reminds of the kinds of numbers we used to see 30 years ago. But the details show that gasoline prices rose 17.3%. Recently, crude oil prices have been heading lower so consumers have been experiencing a little relief at the pump. The report also showed higher car prices but I doubt that will last.

The core rate of consumer inflation, which excludes food and energy prices, was just 0.2% last month. For now, inflation is contained but I don't expect it to stay that way for long. Once the dollar tumbles, it will cause oil and other commodities to soar.

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