Not Telling It like It Is

This article from the Financial Times, while not being completely without interest, doesn't get anywhere near the heart of the problem:

Strong industrial production and housing market data bolstered optimism over the US economy on Tuesday as the first fall in core inflation for 21 years suggested the Federal Reserve was under no pressure to raise interest rates.


Industrial production grew by 0.9 per cent in November - almost double expectations. The strength was most obvious in the technology sector, where output rose by 4.1 per cent following a 4 per cent increase in October and a 2.3 per cent rise in September.

New homes were built last month at the fastest pace in 20 years, with construction starting on 2.07m homes in November on an annualised basis.

The data failed to cheer the dollar, which was little changed against the euro at $1.232 by the middle of New York trading.

Economists said the strengthening of the US economy was failing to attract more funds from international investors. Tuesday's current account figures showed net financial inflows into the US fell by $26.7bn in the third quarter to $123.3bn.

The reaction to the data from other markets was relatively muted, with the Dow Jones edging 61 points higher to 10,084. The yield on the 10-year Treasury bond slid from 4.27 to 4.23 per cent.

Yet in spite of the strengthening of the economy analysts said it would be some time before the Federal Reserve would need to apply monetary brakes. Consumer prices - excluding the volatile energy and food sectors - fell by 0.1 per cent in November, the first decline since December 1982.

This takes the core year-on- year rate to 1.1 per cent, the lowest since May 1963. Core service prices, which sparked early fears over inflation by rising 0.4 per cent in October, fell back to zero in November.

"These very low figures are likely to be reversed next month and I don't think we are seeing a revival of the deflationary threat," said Steve Cochrane, director of US research at Economy.com.
Source: Financial Times
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