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July 15, 2008

Inflation update

With rising food and fuel prices, inflation has now been pushed to a front page issue. A new inflation report for May was just released. Is it good or bad news? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We're talking about consumer inflation, and I'd have to say the report was mixed. If you look at the overall inflation rate, what's called headline inflation, over the last year, from May of '07 to May of this year, the inflation rate was 4.2 percent, clearly higher than what we've gotten used to a couple of years ago but not devastating, certainly not double digits. But if you go inside those numbers, certainly some items are up much faster. Food prices over that year were up 5 percent. Transportation - led by, of course, gas - up 8 percent. However, outside of food and fuel, the inflation rate was a much more modest 2.3 percent. Some prices have actually fallen. Clothing prices are down over this last year. Car prices - not driving a car - but the price of a car is down. CDs, computers and other tech equipment, all those prices are falling. I think the problem though is that food and fuel are things that people buy every week. Sometimes, people buy them a couple of times a week. That's what they see, and they see those going up rapidly, and I think that's causing most people to think, gee, the overall inflation rate is much higher than the reported rate."

Posted by Dave at July 15, 2008 08:00 AM