Trade And Inflation
Inflation & Trade Patterns
The Growth in both output and employment decelerated during 2006. At this time, the increase of inflation had occurred. The increase of inflation was driven in part by a tightening labor market and in part by a significant jump in energy prices. Exhilarated inflation caused the Federal Reserve to push short-term interest rates upward by more then anticipated a year ago. The fundamental key to this unfolding drama is the American Consumer. From 2001 to 2005, at the end of the economic recession, consumption spending accounted for 78% of the increase in output, with spending on housing construction comprising another 13%. Throughout the past year, consumption has captivated pretty well, sweeping 70% of growth in the first three quaters of 2006. Expectation was arrived of this continuation in this basic pattern—"consumption at a level that is adequate to maintain forward momentum in spite of continuing declines in the housing sector." Inflation will......
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