Inflation

Spending is slowing - but so is inflation, offering the Federal Reserve more room to stimulate the economy by lowering interest rates next month, if it wants. Retail sales softened in October, rising 0.2 percent after a 0.7 percent gain in the previous month, the Commerce Department said yesterday. The report underscored analysts' expectations that consumers will be more reluctant to spend freely over the holiday season. It was the smallest sales gain since a 0.1 percent rise in August.

A lower-than-expected increase in wage and benefits costs helped ease worries yesterday that the Federal Reserve will raise interest rates next month and sent stock prices soaring.The Dow Jones industrial average, the most widely followed market gauge, rose 227.64 points, closing at 10,622.53. The rally extended Wednesday's 92-point gain. It was the Dow's biggest advance since it rose 235.24 on Sept. 3.The market has been dominated in recent weeks by debate on inflation and interest rates.

WASHINGTON -- U.S. companies added jobs at a stronger-than-expected pace in February without an inflationary increase in wages, offering relief to stock and bond investors apprehensive that the Federal Reserve might push interest rates higher.The economy created 275,000 jobs last month, exceeding analysts' forecasts of a gain of 244,000 and January's increase of 217,000, Labor Department figures showed yesterday, drawing from a survey of employers. A surge in retail and construction hiring was tempered by a drop in factory payrolls.

ARE YOU LOADED with high-technology stocks?"Be careful of high-techs," warns Personal Finance. "If inflation picks up Wall Street's soft spot will be overvalued Internet stocks. Many tech stocks will watch their inflated valuations collapse."And guess what? We're selling one of our biggest winners -- Microsoft. It has three strikes against it -- growing competition, a government lawsuit and its lofty valuation."WALL STREET WATCH: "I'm raising cash. Bargains were abundant last summer, but now they're scarce.

Stocks soared to record levels yesterday after a government report showed benign increases in hourly wages and total employment, soothing investor fears that the Federal Reserve might raise interest rates again soon to keep inflation at bay.In its report, the Labor Department said the U.S. unemployment rate held steady at 4.1 percent last month, matching a 29-year low reached in October. The U.S. economy added 234,000 jobs last month, slightly more than economists had expected. Wage growth was modest for the month at 0.1 percent, about one-third as much as was expected.

The U.S. economy might be rocking and rolling, but inflation remains remarkably well behaved.That was the main message from a fresh batch of government data on consumer prices, industrial activity and home building released yesterday. The new evidence further soothed investors who have been worrying that the Federal Reserve might raise short-term interest rates more than a quarter-point next week to slow the economy. Bond and stock prices rallied.The Consumer Price Index -- a broad measure of inflation that reflects the prices of imports and services as well as those of domestically produced goods -- rose just three-tenths of a percent last month after registering no increase at all in May and June, in line with forecasts.

WASHINGTON -- Despite a remarkable run of prosperity that he credited in large part to new technology, Federal Reserve Chairman Alan Greenspan delivered his bluntest warning in months yesterday that the economy could still be derailed by its old nemesis, inflation.Delivering a sweeping analysis of the forces reshaping the economy at home and abroad, Greenspan said the ability of businesses to use rapid advances in computers and communications to hold down costs and produce higher-quality goods and services had helped hold down price increases, bolster the stock market and allow the economy to grow robustly.

T. Rowe Price Associates Inc.'s chief economist sees the country's economic engine chugging into the new year under a full head of steam."I am bullish on the U.S. economy," Alan D. Levenson said yesterday at Price's annual economic outlook seminar for reporters in New York.And little wonder. Inflation is low; the federal government's budget is balanced; unemployment is at rock-bottom levels; and productivity is rising, thanks to the booming information technology industry, he said.Levenson sees little that can stop the expansion except for a spike in inflation, which is about 2 percent.

The "I" word -- inflation -- rejoined the American economic lexicon yesterday when a government report showed April prices for consumer products and services rose at their fastest rate in nine years, prompting stocks to plummet on fears the Federal Reserve might raise interest rates soon.The Dow Jones industrial average dropped nearly 194 points, closing at just above 10,913. The yield on the benchmark 30-year Treasury bond jumped to 5.92 percent -- the highest level since a year ago today.

To understand the task facing fiscal policy-makers, think of the U.S. economy as a car in a very long race and the Federal Reserve Board as its pit crew.The sleek American model is running well in the ninth year of an economic expansion, a blur compared with other cars on the track. The challenge is how to keep it going at a strong, steady pace without burning it out.The Fed is expected by many to raise rates for a second time this year on Aug. 24 to keep inflation in check. But economists looking under the hood see very different things.

The Social Security Administration announced Thursday that beneficiaries won't be getting an increase in their checks next year - the first time that has happened since automatic adjustments began in 1975. A lack of inflation triggered the decision, which will affect more than 57 million people nationwide, the agency said. But Lois King, 84, doesn't buy it. "Everywhere you go, everything is higher than it was six months ago. Sometimes from one week to the next," said the Towson resident, who receives two-thirds of her income from Social Security.

To understand the intense economic pressures sweeping the globe, you could earn a master's in business administration or convene a focus group of economists and Fortune 500 CEOs. Or you could look at McCormick & Co. The spice purveyor illustrates just about every kind of contemporary economic trauma: soaring crop prices, expensive energy, depressed consumers, inflation, tighter profit margins, layoffs, gyrating currency values and nutty credit markets. The Sparks-based company has coped very well, partly by raising prices and contributing to the nation's 4 percent-plus inflation rate.

Almost everything that consumers spent money on last month - including food, electricity and gasoline - took a bigger piece of their paychecks. Inflation in June rose at the fastest rate in 17 years, the government said yesterday, a day after the chairman of the Federal Reserve warned that inflation poses a significant risk to the nation's economic outlook. The Consumer Price Index, which measures the prices of a batch of common household products, rose 1.1 percent in June, the Labor Department said, capping a year in which inflation has surged to levels considered by some a threat to the stability of the economy.

Reading recent headlines, it might be easy to conclude that the economy is in a death spiral. But in Maryland most people still have their jobs and are likely to keep them. Buttressed by substantial federal government spending, the state's unemployment rate is likely to remain solidly below the national average, and analysts expect Marylanders' share of the pain from the economic turmoil to be proportionately moderate. Stormy weather is ahead, but every economic decline has within it the seeds of recovery.

Asbestos victims offered billions W.R. Grace & Co. said it has reached a deal that could be worth more than $3 billion to settle thousands of lawsuits by people who say they were sickened by exposure to the company's asbestos products. The deal could enable the Columbia chemicals maker to emerge by year's end from one of the most complex bankruptcy reorganizations in U.S. history. Visit a doctor at drugstore Doctors with Columbia's MedStar Health soon will provide urgent care at area Rite Aid stores.

Average salaries in the Baltimore metropolitan area have been increasing faster than the sapping power of inflation - but just barely in some counties. Weekly wages rose $2 in Baltimore City from the summer of 2006 to the summer of last year, after factoring in the mounting cost of living, according to figures released yesterday by the federal Bureau of Labor Statistics. Anne Arundel County had the second-smallest weekly increase in wages - $7. That is less than a 1 percent raise in each case.

You probably didn't know this, but your wallet does. The post-2001 federal spending boom has made inflation substantially worse in the Washington-Baltimore corridor than in the rest of the nation. This will be the sixth year in a row in which consumer prices have risen more locally than in the rest of the country, according to the Bureau of Labor Statistics. The national figures are bad enough: Through November consumer prices were 4.3 percent higher than in November 2006, one of the worst showings in a decade.

Among the many things to be thankful for this holiday season is that you're not Federal Reserve Chairman Ben S. Bernanke. He's besieged by turmoil in the credit markets, Wall Street clamoring for more interest-rate cuts and now inflation data that might tie his hands as he tries to keep an economic slowdown from snowballing into recession. The Bureau of Labor Statistics reported yesterday that consumer-price inflation jumped 0.8 percent in November, the largest increase since the aftermath of Hurricane Katrina.

Spending is slowing - but so is inflation, offering the Federal Reserve more room to stimulate the economy by lowering interest rates next month, if it wants. Retail sales softened in October, rising 0.2 percent after a 0.7 percent gain in the previous month, the Commerce Department said yesterday. The report underscored analysts' expectations that consumers will be more reluctant to spend freely over the holiday season. It was the smallest sales gain since a 0.1 percent rise in August.

The end of denial always requires a jarring encounter with reality. Mine came at the Giant, where a $4 gallon of milk made clear - in a way that somehow $3 gas hadn't - that forces pushing up consumer prices are aligned as they haven't been since the 1980s. A worldwide boom has driven up the costs of basics such as energy, food and metals as well as shipping capacity and smart workers. The computer-productivity and global-outsourcing trends that enabled a decade of low inflation seem to be running out of steam.