Consumer prices rose 0.2% in April 2008, the U.S. Labor Department announced Wednesday, a statistic below the consensus estimate as oil prices moderated during month, offsetting rising food prices.

Economists surveyed by Bloomberg News had expected April 2008 consumer prices to increase 0.3%. Consumer prices increased 0.3% in March 2008.

Also, the core rate, which excludes the frequently-volatile food and energy component, rose just 0.2% in April 2008, inline with the Bloomberg News survey 0.2% consensus estimate.

On a year-over-year basis, consumer prices have risen 3.9% and the core rate has risen 2.3%. The core rate remains slightly above U.S. Federal Reserve's 'comfort zone' for inflation. The Fed uses the core CPI rate as one of its primary gauges of consumer-based inflation.

April 2008 CPI: 'Surprisingly tame'

Economist David H. Wang said the April 2008 CPI report was a bit of a surprise -- one that may help the U.S. economy. "The report was surprisingly tame. We do see rising food costs, but the energy component was not as bad as expected," Wang said. "Also, core year-over-year inflation is not too bad, and the Fed [U.S. Federal Reserve] will look favorably upon this, if it remains moderate."

One oft-repeated phrase from Washington is that there is "no magic wand" that can lower oil prices. This has proven to be comedic gold for some. But for people who find themselves paying nearly $4 a gallon to fill up their tanks, the joke is not so funny. After all, with an "oilman" in the White House, it should come as no shock that the price of a barrel of the gooey stuff has risen 5-fold since January 2001 -- hitting a record $126 today.

I noticed that every time the Fed cut interest rates, the dollar dropped in value and the price of oil rose. As I posted, this dynamic is as sure of a bet as you can get in the real world. That's why traders are shorting the dollar and going long oil. And they're betting enough on that trade to drive up the price of oil consistently. As I discussed last night on New England Cable News (NECN), the European Union decided yesterday to keep its interest rate at 4% to fight inflation. Ours is a mere 2% so investors are selling dollars and buying Euros.

This brings us to how Washington can cut gas prices fast. All it has to do is to raise interest rates. This little move requires no Congressional approval and the oval office occupant doesn't have to sign a bill. If our Fed got serious about fighting the rampant inflation it has unleashed, it would raise the Fed funds rate, the dollar would strengthen, the price of oil would drop, and you would pay less at the pump. It's as simple as that.

U.S. consumer confidence declined in April 2008, as consumers continued to express concern over rising food and energy costs, which are boosting retail inflation and lowering disposable income.

U.S. consumer confidence fell in April 2008 to 62.3 from a revised 65.9 in March 2008, the Conference Board announced Tuesday. It was the index's lowest reading since 2003.

Economists surveyed by Bloomberg News had expected the index to drop to 62.0 in April 2008. In February 2008, the index stood at 76.4.

The board said consumers' evaluation of present-day conditions weakened further in April 2008. Those claiming business conditions are "bad" increased to 26.7% from 25.5%, while those claiming business conditions are "good" dipped slightly, to 15.3 from 15.6%.

Consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 27.9% from 24.65, while those claiming jobs are "plentiful" decreased to 16.6% from 19.2%.

Last Friday, April 18, Precision Drilling Services TR (NYSE: PDS), the Canadian Trust, announced that the Board of Trustees has approved a cash distribution for the month of April 2008 of $0.13 per trust unit of Precision. The distribution will be payable on May 15, 2008 to unit holders of record on April 30, 2008.

The current dividend yield of 5.8% remains very generous and far above most other stocks in the sector. After some of my high dividend stock recommendations either under performed or simply cut their distribution, it is reassuring to see that PDS not only is maintaining its dividend, but in this particular case continues to pay out monthly, allowing for better compounding of the yield.

The stock closed today at $27.15, up 75.5% from $15.47 when I recommended the stock three months ago. If you got into the stock back then you would still be receiving over a 10% yield. Last year I had several high flyers but not all of them stayed up so I am watching Precision closely for signs of weakness or changes in the business.

Imagine a large recession in which one of the key energy components almost doubles in price. The tab for natural gas is up by almost double since last summer. That is the same natural gas which most people use to heat their homes. Being cold is not a lot of fun.

According to The Wall Street Journal, "Prices in the U.S. have risen 93% since late August as power-hungry nations like South Korea and Japan compete in a global natural-gas market."

Who says inflation is not a major threat to the US economy? Add to the natural gas spike the rising cost of oil which has pushed gasoline to all-time highs. Add to that increasing food prices due to the bump up in the price of grains such as wheat and corn. Those commodities are being used to product the alternate energy source ethanol.

The picture complicates the job that the Fed and Treasury have to do. Lowering interest rates often increases the ability of businesses and consumers to spend. That, in turn, pushes inflation higher. Not lowering rates could exacerbate the credit crisis and lead to more home and credit card defaults.

There is one silver lining to the cloud. Banks are not passing lower rates on to customers. They are hording the cash that they get from the Fed. It is an ugly reality, but consumers and small businesses do not have access to the capital which they would need to start spending money again.

None of that solves the natural gas problem per se, but it could mean that people will cut back a bit on how warm they keep their homes. That, at least, would be a start.

Douglas A. McIntyre is an editor at 247wallst.com.

The good news keeps on coming. The government now expects oil prices to stay above $101 a barrel for the balance of the year. That means that many Americans will be deciding between driving and the costs of basic daily necessities.

U.S. Energy Information Administration "had predicted $87-a-barrel oil in January," according to The Wall Street Journal. So, the agency has revised its target up 16% in a little over three months.

The biggest question from the report is whether Americans will drive less and keep oil from rising further? The answer may be that it does not matter.

So much of the demand for the world's oil comes from emerging markets such as China that a slight drop in US consumption is almost certain to be taken up somewhere else. Refinery capacity is not growing, so the supply of gas and diesel is not likely to improve. And, new, large oil fields are not coming on line at the rate that they were twenty years ago.

The new estimate on the price of oil may actually be conservative. Watch for it to be revised up again in June. The global demand for crude is that great.

Douglas A. McIntyre is an editor at 247wallst.com.

The reality of rising food prices in the United States sometimes registers with consumers in subtle ways.

A shopper who regularly buys groceries at the Stop & Shop in the New York suburb of Larchmont, New York, scans a loaf of bread and suspects that the scanner must have made a mistake because it indicated $2.49 for the loaf.

Then the shopper realizes the scanner didn't make a mistake: that loaf of bread, which was just $1.79 or thereabouts a few months ago, is now more than two bucks -- a 39% price jump.

Whether you realize it or not, food prices are ramping higher, due to surging commodity prices and rising demand for high-protein foods in emerging market countries. Food prices rose 5% in 2007, according to U.S. Department of Agriculture data, the Associated Press reported Tuesday.

The U.S. economy slowed substantially in Q4 2007 to a 0.6% annualized rate, the U.S. Commerce Department announced Thursday, in its final estimate for the quarter. It was the slowest annualized growth rate since 2002.

Economists surveyed by Bloomberg News had expected the final Q4 2007 GDP statistic to be 0.6%.

For 2007, the U.S. economy grew 2.2%, after adjusting for inflation -- its slowest growth rate in five years. The U.S. economy grew 2.9% in 2006.

In dollar terms, U.S. GDP in 2007 totaled $13.84 trillion, not adjusted for inflation.

In Q4 2007, business inventories increased 6%, exports increased 6.5%, government spending rose 2%, imports fell 1.4% and residential investment plummeted 25.2%.

The report was a virtual carbon-copy of the Commerce Department's earlier estimate for Q4 2007 GDP, save new data on corporate profits, which were revised $37.9 billion lower to a $1.11 trillion annualized rate. Corporate profits after taxes are up 3.3% from a year ago.

U.S. consumer confidence is at its lowest level since the Nixon Administration of the 1970s, according to one measure. U.S. consumer confidence fell in March 2008 to 64.5 -- a 35-year low -- the Conference Board announced Tuesday.

Economists surveyed by Bloomberg News had expected the index to drop to 73.0 in March 2008. The February 2008 index was revised to 76.4.

The board said that consumers' evaluation of present-day conditions weakened significantly. Those claiming business conditions are "bad" increased to 25.4% from 21.3%, while those claiming business conditions are "good" declined to 15.4% from 19.1%. Consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 25.1% from 23.4%, while those claiming jobs are "plentiful" decreased to 18.8% from 21.5%.

On Saturday, President Bush warned that the government must guard against going too far in trying to fix the troubled economy. "If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse -- and end up hurting far more homeowners than we help."

"Democrats know that wait-and-see is not a responsible strategy for an economy that is teetering on the brink of recession," said Senate Majority Leader Harry Reid. "The president continues to convince himself that inaction is the cure-all for the economic problems hurting hardworking Americans." Democrats intend to strengthen the economy with measures dealing with housing, energy efficiency, and renewable energy.

President Bush said the recently passed program of tax rebates should begin to lift the economy in the second quarter of the year and have an even stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market.

Consumer prices rose 0.3% in December, above the 0.2% consensus estimate, but the core rate rose just 0.2%, in-line with the 0.2% consensus estimate, the U.S. Labor Department announced Wednesday.

Prices at the retail level increased at an above-average rate during 2007. For 2007, consumer prices increased 4.1% - - the biggest increase since 1990. Energy prices rose 17.4% in 2007 while food advanced 4.9%.

Meanwhile the core CPI rate increased 2.4% last year - - above the Federal Reserve's 'comfort zone' for inflation. The Fed uses the core CPI rate as the primary gauge of consumer-based inflation.

In December, energy prices rose 0.9%, gasoline increased 1.1%, natural gas climbed 2.3%, medical expenses increases 0.3%, and housing prices rose 0.3%.

Economic Analysis: A lukewarm CPI statistic. December's 0.3% CPI increase was above the consensus estimate, but the core CPI rate rose just 0.2%. The December core statistic should help convince the Fed that inflation - - while still at intolerable levels as measured by the producer price index (PPI) - - has not shown up fully yet at the retail level. That should enable the Fed to cut interest rates by 50 basis points at its next meeting, and later this winter to help stimulate the slowing U.S. economy.

Producer prices fell 0.1% in December 2007, below the 0.2% consensus estimate, the U.S. Labor Department announced Tuesday.

Meanwhile, the core PPI rate, which excludes food and energy, increased 0.2%, in-line with the 0.2% estimate. In December, wholesale energy prices fell 1.9%, while food prices increased 1.3%

2007 PPI at uncomfortable levels

Still, despite December's mild PPI report, producer prices increased at an above-average rate of 6.3% during 2007 -- the index's biggest jump since rising 7.1% in 1981 -- and well ahead of the 1.1% rise for 2006. Core PPI increased 2.0% in 2007, the same rate as 2006.

The U.S. Federal Reserve uses the PPI as one gauge for both wholesale-based and consumer-based inflation. Historically, a rise in PPI generally signals a rise in consumer prices down the road.

Economic Analysis: A good news / bad news PPI statistic. December's 0.1% PPI decline is welcome news, but it caps a terrible year for prices at the wholesale / commercial level driven by surging commodity costs. Even so, the 2007 PPI performance is unlikely to change the U.S. Federal Reserve's easing monetary policy stance. Further, analysts expect wholesale inflation to moderate slightly in 2008, due to a slowdown in the U.S. economy.

While traveling in the Middle East today, President George Bush made his case to OPEC nations for an increase in global oil supplies. Bush stated that current high oil prices could create an economic slowdown in America and that all consuming economies could feel the pain of recent record high prices.

The statement came during the President's first visit to OPEC powerhouse Saudi Arabia, and he argued that a slowdown by consuming economies, such as the United States, would lead to less oil and gas purchases which will in turn hurt OPEC nations. Bush has also visited Kuwait and the United Arab Emirates and is doing his best to spread his view that "oil prices are very high, which is tough on our economy".

OPEC will next meet on February 1 to discuss the possibility of increasing supplies. Bush is not the only one in the Middle East pleading their case for OPEC's lifting of their quotas. U.S. Energy Secretary Samuel Bodman headed to the Middle East yesterday to push for increased output from the cartel.

The New York Times reports that nobody knows where the price of oil will go next. It quotes John Richels, president of the Devon Energy Corp. (NYSE: DVN), an international oil and gas company based in Oklahoma City, saying $150 a barrel was possible, but so was $55.

To me, the most interesting part of this forecast is that an executive in the industry has no idea where the price will go. As the Times suggests, this is because the price is determined by traders and hedge funds. And these market participants view U.S. equities, housing, credit and currency markets as shaky. By contrast, they see oil and other commodities as a safe haven.

If the Times is correct, then the price of oil will be determined by the direction of U.S. equities, housing, and currency and whether these traders and hedge funds continue to see oil as a store of value. If you think that housing prices will rise in 2009; that the U.S. economy is in for robust growth and a balancing budget in 2009; and that peace will break out in the Middle East then those traders and hedge funds are likely to sell oil and buy dollars -- dropping the price to Richels' $55.

Otherwise, $150 here we come.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Devon securities.

George W. Bush has weakened America's economic and political standing while strengthening the hand of our enemies. As Iowans caucus today, it remains to be seen whether a leader will emerge this year who can reverse the forces Bush set in motion before America loses its leadership position in the world.

What forces did Bush set in motion? Bush created an enormous federal budget deficit through his $1.6 trillion tax cut. He increased government borrowing to a record $9.1 trillion. His wars in Afghanistan and Iraq have contributed to global instability which has helped drive the price of oil up four-fold from $24 a barrel to nearly $100. The dollar has lost 60% of its value -- for example, the Euro has climbed from 92 cents to to $1.47. And his drive to increase home ownership -- supported by subprime mortgage lenders like Ameriquest -- has contributed to tens of billions of write-downs by banks that bought securities backed by those liar loans.

This is not the first time global leadership has changed hands in world history. According to Niall Ferguson, in the 1870s, the Ottoman empire lost its lead in the world as its over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. Then, the Ottoman empire sold off its shares of the Suez Canal as well as its tax revenues to pay off the debts it incurred to finance the Crimean War, railway and canal construction and conspicuous consumption. Back then the beneficiaries of those cheap asset sales were western Europeans.