While the news media is in a panic about inflation and the potential for a recession, the actual numbers are a bit more encouraging. The Labor Department released the figures for February, showing consumer inflation at the lowest level in the last six months. Energy and food prices leveled out, and played a big part in this. (Although this month, energy prices sure have been on the rise!)
Experts say that February's numbers won't be repeated again soon, though. Increases in energy prices are expected to continue to be painful. The food numbers were interesting: prices declined for vegetables, fruit, poultry and pork. They were up for cereal and bakery. Overall food prices are expected to increase in the coming months, though, as corn is being used in ethanol and creating a ruckus in every industry that previously depended on corn. (Think corn-based food products and animals that use corn as feed.)
Inflation was bad in 2007, with a 4.1% increase, the largest in the last 17 years. 2008 isn't expected to look any better overall, so I think consumers will just be forced to change their lifestyles to accommodate the price increases. I don't think that government intervention is the answer. In fact, government meddling in the form of regulations, mandates, and taxes has a track record of screwing things up even worse. Your best bet is to control your spending now and save some money for a rainy day to help you weather the even higher prices that are coming soon.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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