28. Dormant for Now, Inflation Shows Signs of Awakening

WASHINGTON - Is inflation begin­ning to awaken from its long slumber?

At first glance, most U.S. government data seems to say no. Last week, two key gauges painted a fairly benign inflation picture in the U.S., suggesting that a surge in energy costs hasn't yet been enough to spark widespread price increases.

But beneath the calm, some econo­mists are beginning to detect signs of strain. They worry that the inflation reports were pushed down by unusually large price decreases in certain areas, which buck recent trends and are unlike­ly to recur. Absent those drops, the over­all inflation numbers would have edged higher.

For now, inflation remains the dog that hasn't barked. In the U.S., the consumer price index, a closely watched inflation measure, inched up just 0.2% in January, the Labor Department said Friday. The core component of the index, which excludes the volatile food and energy components, also rose just 0.2%. For the year, the overall index rose 2.7%, with the core component climbing 1.9%.

Confirming earlier reports, the survey found that energy costs rose sharply for the month, jumping 1%. and are up a whopping 14.7% for the year. Gasoline costs climbed 1.6% in January and are up 32.4% for the year.

Falling prices for air fares, new cars and apparel goods - which declined 1.1%, their sharpest decrease in 11 years - helped off­set the higher energy costs, the survey found. Computer prices also fell, dropping 1.7% in January and 24.4% for the year.

In the CPI report, meanwhile, a sharp drop in apparel prices due to postholiday discounting helped keep the overall mea­sure fairly flat. The increase in cigarette prices also wasn't fully reflected in the CPI numbers, and should push the February figure higher.

Friday's release of the CPI was the first since the U.S. Federal Reserve Bank announced plans to base its inflation mea­surements on the Personal Consumption Expenditures index, or PCS, rather than the CPI, which Fed officials have long complained overstates inflation. The CPI is still very important to financial markets around the world, however.

Vocabulary:

inflation reports – данные о состоянии инфляции

…which buck recent trends – которые искажают реальные тенденции, наметившиеся в последнее время

buck the trend – двигаться против течения; выступать против основной тенденции

apparel goods - одежда

personal consumption expenditures - личные потребительские расходы

TRANSLATION NOTES:

a fairly benign inflation picture – уровень инфляции достаточно низкий (ситуация с инфляцией достаточно благоприятная)

Это выражение является хорошим примером антонимического перевода. (См. часть Ш, раздел 2, § 4, п.4.4)

the Labor Department - Министерство труда США

29. Will This Slowdown Be Satisfactory?

After its robust growth in the first half of the year, the Canadian economy appears to be slowing, and inflation seems well-con­tained. However, in a surprisingly hawkish Aug. 16 policy report, the Bank of Canada isn't convinced that it can relax its guard.

The bank now expects growth this year between 4.25% to 4.75%, up from the 4% to 4.5% range in its May policy report. In the most recent three quar­ters, the economy grew at an annual rate of 5.5%. That means the bank's projection implies a slowdown for the second quarter and beyond.

However, the boc made it clear that it expects growth to remain strong enough to push against the economy's capacity limits, and that it would remain vigilant against inflationary pressures. The boc projects core inflation— excluding energy and food— to rise only slightly, from 1.5% in June to 2% next year. The boc's target range for inflation is 1% to 3%. The bank appears unconvinced that the US economy will slow enough to ease price pressures in the US's biggest trading partner.

Exports, consumer spending, and capital outlays powered the first half’s stronger-than-expected growth. Solid US demand is fueling exports, pushing Canada's June trade surplus to a record. Household spending remains firm, given the 0.8% jump in June retail sales. And businesses continue to invest heavily in high-tech equipment.

Indeed, the boc is intensely studying the degree to which such investments have lifted productivity and expanded Canada's ability to grow faster than it has in the past without sparking inflation. The bank recently surveyed 140 companies, and the results sug­gest that investment in new technologies and a wave of corporate restructurings in the 1990s are bearing fruit. Further studies aimed at pinning down the economy's new speed limit are expected to be re­leased in November.

Still, whatever room for additional growth there may be appears to be rapidly shrinking. If the Federal Reserve hikes US rates again later this year, look for Canada to follow suit.