Inflation on the Distant Horizon

Although inflation remains mild now, some firms are raising prices, hinting at more problems to come.

Is inflation ahead? The latest barometer readings are confusing. Worrywarts point to the Producer Price Index for finished goods, which rose a more-than-expected 1.4% in January. That follows increases of 0.4% in December and 1.5% in November. This index can be an early warning for consumer prices, though it often flashes a false signal. Those who are less concerned note the Consumer Price Index (CPI), which increased a mere 0.2% in January. That’s the fifth straight month at 0.2%.

We see inflation as a distant threat -- real, but not imminent. What catches our eye are surveys indicating that more companies are starting to raise prices, chiefly in health care, energy, utilities and basic consumer products such as food and medicine. And the latest CPI report, though tame, shows higher prices of some key items, including used cars and medical care.

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Jerome Idaszak
Contributing Editor, The Kiplinger Letter
Idaszak, now retired, worked on The Kiplinger Letter as its economics writer for 21 years. Before joining Kiplinger in 1992, he worked for 15 years with the Chicago Sun-Times, including five years as a columnist and economic correspondent in the Washington, D.C., bureau, covering five international economic summit meetings. He holds bachelor's and master's degrees in journalism from Northwestern University.