NEXT STOP: RECESSIONVILLE….Fasten your seatbelts. Economic growth is tanking and inflation is spiking:
Gross domestic product rose at a seasonally adjusted 0.6% annual rate October through December, the Commerce Department said Wednesday in the first estimate of fourth-quarter GDP.
Aside from the housing slump, slowing consumer spending, inventory liquidation and lower overseas sales restrained the economy. The 0.6% pace wasn’t only much slower than the third-quarter’s racing 4.9%, it was far below expectations on Wall Street.
….The price index for personal consumption expenditures rose by 3.9% after increasing 1.8% in the third quarter. The much-watched PCE price gauge excluding food and energy increased 2.7% after rising 2.0% in the third quarter.
It looks like Alan Greenspan was right: his successors are going to have a much harder job than he did because they won’t have the luxury of working in a low-inflation environment. Greenspan could focus on economic growth without worrying much about stoking inflation, but Ben Bernanke can’t. He’s got a housing bubble that’s blown up, a credit crunch, slowing consumer demand, and rising inflation. The right policy response is tricky and delicate.