Here's Why United Was Just Named America's Worst Airline
The Smart 401(k) Rollover Option That Almost Everyone Forgets
Fourth quarter GDP ended on a uptrend, coming in at 3.1%. The state of the economy was healthy and it looked like growth would continue to match or exceed Q4. Based on that scenario, Bank of America (BAC) analyst Ethan Harris, forecast first-quarter 2011 GDP to come in at 3.3%.
But in the few short months of 2011, the world is getting turned upside down. The conflict in Libya has cut OPEC oil production and sent oil prices skyrocketing. In turn, the price of gasoline is nearing $4.00 per gallon. And food processors are raising prices due to higher raw commodity prices. These two factors have put a dent in the household budget.
Wages are not rising. Unemployment is still near 9%. Corporations are sitting on piles of cash instead of hiring new workers.
As all of this was taking hold, Bank of America lowered its forecast to 2.2%. Now with further analysis, their projection is for growth of only 1.5%, as reported in Fortune.
Now we see the price of Brent crude at $120 per barrel and corn prices at record highs of $7.60 per bushel. These numbers have not even started working their way down to the consumer. The Federal Reserve set a 2% rate for inflation. You can bet that this will be exceeded by a wide margin -- that is if the Fed discards the "core index," which excludes food and energy. Otherwise they will hide all this and tell us that all is well.
We have yet to sort this data for implications on corporate profits and stock prices in the coming months.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
4-05-2011 @ 12:56PM
william lindblad said...
The Fed can neither hide or ignore this particular type of inflation as it is so blatantly obvious and to try to do so would endanger credibility. As they have no control of this particular situation they will have a hard choice - continue stimulus policy or raise interest rates to counter inflation. I think that they will go with the later simply because the hikes in food and oil will put the economy in reverse. I expect that it will effect everything and the recent job gains and lower unemployment will not last, not to mention the wave of discontent that will also be part. There might be options in avoiding another mess as we could convert to a natural gas based fuel to replace oil, but this is a pipedream as it would take government backing and the crowd on the Hill is hardly proactive. These days they make "agree to disagree" a permanent position.