Inflation watch: Lower prices on the way?

Nancy Marshall-Genzer Jan 17, 2007

TEXT OF STORY

BOB MOON: Also out this morning, the Labor Department’s latest reading on inflation. It reports wholesale prices are still marching upward although, as Nancy Marshall Genzer reports, not as fast as in November.


NANCY MARSHALL-GENZER: The federal government says wholesale prices, measured by its Producer Price Index, were up nine-tenths of a percent in December.

That’s less than half the price surge in November when we were paying more than $3 a gallon for gas.

Yep, the Producer Price Index measures energy prices. It also includes what manufacturers spend on labor and raw materials.

Bank of America chief economist Mickey Levy says businesses will pass their savings on to consumers through lower prices.

MICKEY LEVY: Consumers should be very happy. In the next couple months we’ll see declines in the Consumer Price Index, which increases real purchasing power.

The all-powerful consumer has been the engine pushing the economy along, but Levy points out the Federal Reserve has now made 17 consecutive interest rate increases and that should help keep inflation in check.

He’s expecting a soft landing for the economy rather than a slide into recession.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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