Consumers battle recession, inflation
Washington — To fight off a recession, Congress had the brilliant idea of giving consumers $100 billion or so to spend this summer. The only thing was they didn’t plan on gasoline going to $4 a gallon.
Consumers are getting the money and seem to be spending it. But will it be enough to fan the flames of growth, or will higher prices snuff out the stimulus?
The economic headlines in the coming week will be full of talk about inflation, spending and consumers’ attitudes. The big economic releases will come late in the week, with May retail sales on Thursday, the May consumer-price index on Friday and the June consumer-sentiment index also Friday.
Earlier in the week, Federal Reserve Chairman Ben Bernanke will give a major speech Monday evening about inflation at a conference on Cape Cod in Massachusetts devoted to the theory and practice of keeping prices low and growth high. His two right-hand men, Fed Govs. Donald Kohn and Frederic Mishkin, are on the speaker list as well.
The members of the Federal Open Market Committee seem to be divided over which evil currently presents the greater risk: inflation or recession. The majority, including Bernanke, see continued risks that the downturn will worsen while maintaining hope that inflation is a problem that will fade.
On the other side are the hawks on the FOMC, who worry that the Fed is doing what it always does — pumping too much money into the economy and allowing prices to rise too quickly. The only difference is that this time it’s oil prices that are rising, not the Nasdaq or home prices.
The data in the coming week won’t settle the issue. But the numbers could help us understand how much of the stimulus check is being spent and how much is going into paying down debts and into meager savings.