|Signs of Recovery|
|Topic||Productivity and Growth|
|Key Words||Consumer Prices, Industrial Activity, Non-inflationary Economic Growth, Inflation, and Interest Rates|
The Labor Department's consumer price index rose by 0.2 percent in June, following a decrease of 0.3 percent in April. Overall industrial activity, which includes factories, mines and utilities increased by 0.1 percent in June for the second straight month. This good news, of increased industrial activity with only modest price increase is a welcome finding for the private sector as well as the Federal Reserve.
To the Fed, it means that industrial production appears to have stabilized and the worries of deflation may be behind us. Alan Greenspan, however, still warns, "It (deflation) will continue to engage our attention until it is very clear that it can be fully taken off the table." Economist Stephen Cecchetti says, the report " really does validate the Fed's view that it can keep interest rates low for some time without worrying too much about inflation." This, of course, is exactly what the economy needs to sustain a period of strong economic growth.
The combined finding of increased production and moderate price increases
signals the industrial community to increase production and put the fear
of recession behind them. Many private economists and the Federal Reserve
as well, are hoping that these signals will aid the economy in picking
up momentum in the second half of the year. Companies who have been unsure
of consumer demand are likely to increase production and hire more labor
in anticipation of expected profits from a growing economy.
(Updated August 27, 2003)
|Source||Associated Press, "A Pair of Hopeful Signs For the Economy's Recovery," Kansas City. COM, July 17, 2003.|
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