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Investing Specialists

Will Commodity Inflation Stop This Economic Train?

The race between wages and inflation will be the most important factor in determining the direction of the economy this spring and summer.

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This week is the calm before the storm, as secondary and tertiary data points were released before a flood of economic statistics hits the newswires next week.

Initial jobless claims and the trade balance both came in better than expected. The trade balance results for December were good enough to make me believe that the second reading on fourth-quarter GDP growth may be revised higher by 0.5 percentage points compared with the initial 3.2% reading. Some inventory data due next week, along with retail sales adjustments, will provide some clarity on the prospects for even greater GDP revisions.

Weekly initial unemployment claims fell to their lowest level since the spring of 2008, taking some of the sting out of last week's disappointing monthly employment report. Consumer credit expanded for the second month running, indicating improved consumer confidence. Small businesses were also more optimistic than they have been for some time according to a recent survey produced by the National Federation of Independent Businesses. Sluggish small-business results, due primarily to tight credit conditions, have been one of the items holding back the recovery thus far.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.