Wednesday, June 17, 2009

CPI Drops 1.3% in Past Year, Biggest Drop in 59 Years

U.S. consumer prices increased a seasonally adjusted 0.1% in May as falling food prices largely offset higher gasoline prices, the Labor Department reported Wednesday.

It was the first increase in three months in the consumer price index, which tracks inflation at the retail level. The CPI has fallen 1.3% in the past year, the sharpest decline in prices since April 1950.

The Federal Reserve has warned that deflation remains a major risk, with the global recession putting downward pressure on prices. Slack in the nation's economy -- a high unemployment rate and many idle factories and stores -- should keep inflation in check for the next year or two, Fed officials say. (more)

Wall Street Journal, June 17, 2009

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Capacity Utilization

It’s a simple concept that’s hard to track. Capacity utilization measures what percent businesses are using existing capabilities. 100% marks an economy “firing on all cylinders,” as the corporate catchphrase goes. When consumer demand drops, so too does capacity utilization… and since 1970, it hasn’t picked up until the worst is over.

Yesterday, capacity utilization in the U.S. found a record low of 68.3%. The Federal Reserve said utilization fell another 0.7 percentage points from April to May, to the lowest score since at least 1967, when they started keeping track. Factory output is down 13.4% over the last year, the biggest drop since 1946.