Stagflation Is Back? July Inflation Ticks Up As Economy Slows Down

by Justin Weinger on August 18, 2011

It seems like an already tough time for consumers is getting even worse. It’s getting to the point where you need to learn how to survive on minimum wage jobs.

Despite a sluggish economy (which, according to Morgan Stanley is dangerously close to entering a recession, but you already knew this because you’re an avid reader of this site), continued high unemployment, and an extremely bi-polar stock market, it appears as if consumers have another big ugly problem to worry about: inflation.

can't eat your ipad, inflation up in july, inflation up for the year, are we going to see stagflation, recession and inflation Just remember, no matter how bad things get, you can’t eat your iPad.

(Queue the stagflation talk…)

According to the Bureau of Labor Statistics, consumer prices jumped a whopping .5% in July, and is up 3.6% for the past 12 months.  Considering wages have barely moved over the past 12 months, 3.6% annual inflation is a big deal:

“We’re looking at a situation where income isn’t growing, so large price jumps right now without job growth and income growth behind it, basically mean that consumers are looking at more of their money going out the door at a time when less of it’s coming back in on an income side,” [Daniel] Penrod said.

(Click here to read the entire article on CNNMoney.com)

The main contributors to July’s higher prices included gasoline (up 4.7%), clothing (1.2%), food (.4%) and shelter (.3%).  Considering these are some of the main expenses account for a large chunk of a family’s budget, this is pretty sobering news for already hurt consumers and people living on fixed incomes.

You can read the entire BLS report by clicking here.

Considering the Federal Reserve recently announced it will keep its easy money policies in place through 2013, it’s hard not to imagine a scenario where inflation continues to push upward.  After all, this is more or less what the Federal Reserve wants.

Unfortunately, I think they’re going to get it in spades.

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