Soaring Food Costs Feed Weakening US Economy
Representatives from the Federal Reserve Bank have just issued a new snapshot of the state of business in the United States and report an economy that is weak, with rising costs expected throughout the summer that threaten to trigger inflation and hint at “troublesome implications” for the nation.
Two areas of particular concern to the Fed are the nation’s basically stagnant economic activity and the rapidly rising costs of both fuel and food. In its statement, the agency described manufacturing activity as “generally soft” and the housing market stuck in a rut.
Higher costs in industries from energy to chemicals, metals, plastics, and food are forcing manufacturers to raise prices higher than an increasing number of American consumers can bear to spend. The nation’s retail industry is reporting mixed results with price increases.
Ben Bernanke, chairman of the Federal Reserve, has expressed increasing alarm over the very real threat of inflation but is particularly concerned about the general population’s expectation of inflation, two factors in the recent series of rate cuts which started last September as a means of bolstering a continuously weakening economy.
Concerns with soaring prices for items as fundamental as food and fuel, along with the threat of inflation, home foreclosures, and job cuts have had detrimental effects on the nation’s economy and morale, which may lead to a staying of the Federal key rate, currently at 2%, when rate alterations will be discussed at the June 24 and 25 meeting of the Federal Reserve.
Job cuts have been reported for every month thus far in 2008, with April bringing an increase in the rate of unemployment of 0.5%, or the largest increase in the unemployment rate in one month since 1986.
Source: Associated Press