US Inflation Figures Prove Hard to Nail

11 April 2005

Confusion reigns over US inflation prospects for the remainder of this year.

Leading financial gurus are offering opposing analyses as the latest indicators muddy the waters.

The august Wall Street Journal's survey of 56 leading economists expects inflation to move down from the 3% rate posted earlier in the year, as prices for energy and other commodities ease.

But Gail Fosler, chief economist at the Conference Board, an independent US management information organisation and one of those surveyed, thinks the global economy is slowing. She expects commodity prices to soften while wage pressures grow. The result, she believes, could push the consumer price index up to 3.5% by year's end, well above the WSJ's consensus forecast of 2.5 percent.

Another WSJ favorite, Maria Fiorini Ramirez of MFR, a global economic and financial consulting firm, expects the CPI to rise just 2.3% this year, slightly below the consensus.

Pinning down inflation and the effect of oil prices is becoming increasingly important. Higher consumer inflation could push up interest rates and erode household spending which could eventually derail economic growth.

Currently, however, oil prices are not seen as a threat to the economy, despite their present high levels.

Says Richard Rippe of Prudential Equity Group: "The recent oil spurt has occurred at a time when the economy is doing pretty well. It's easier to absorb the shock."

Data sourced from Wall Street Journal Online; additional content by WARC staff