Economy? What Is the Inflation

¶ … economy?

What is the inflation rate?

The most widely used measurement of inflation is the consumer price index. In May, the consumer price index decreased by.1%, after increasing.6% in April and by.6% in March. In May, energy prices decreased rapidly, after increasing for three months in a row. Price indexes for transportation also fell. The largest increases were for medical care and recreation. the.1% decrease reverses a series of relatively large increases in the CPI. The annual rate of increase over the last three months was 4.6% and over the last 12 months, 2.9%. Annual inflation rates during all of 2002, 2003, and 2004 were 1.6, 2.3 and 2.7%.

Is inflation a worry or are we in a period of stable prices?

While a number of reports will focus on the decrease in the consumer price index, caution should be taken in placing too much emphasis on any one month change. In December of 2004, the CPI fell by.1%, but since that point has increased at a faster rate than the last three years. Extra attention is given by forecasters to the core index as it tends to show more lasting trends in prices. This month's results provide some evidence that the increase in energy prices has not significantly influenced rates of increases in all other prices.

3. What is the unemployment rate?

Currently the unemployment rate is 5.1%.

4. Will the high unemployment rate cause deflation?

Economists had looked for the unemployment rate to stay at the 5.2% level as seen in April of this year, 2005; however, the current unemployment rate is not far behind. Deflation is not foreseen due to the high unemployment rate.

5. What is the current structure of the labor market?

The current structure of the labor market is that a recent Labor Department report showed employers added 78,000 jobs in May, down sharply from the 274,000 jobs added to payrolls in April of this year, 2005. It was the smallest monthly jobs growth since August 2003, when only 2,000 jobs were added, according to revised figures from the Labor Department.

6. How does the current structure affect the threat of cost push inflation or deflation?

There are no inflationary or deflationary signs in recent reports.

7. What is the growth rate of GDP?

The current growth rate of the Gross Domestic Product (GDP), which is the output of goods and services produced by labor and property located in the United States, increased at an annual rate of 3.5% in the first quarter of 2005, according to preliminary estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.8%. The major contributors to the increase in real GDP, in the first quarter were personal consumption expenditures, private inventory investment, exports, residential fixed investment, and equipment and software. Imports, which are subtracted from the calculation of GDP, increased.