Inflation worriers
(FORTUNE Magazine) – The latest government statistics on the economy, generally indicating stronger activity than expected, have also roused the relatively quiescent inflation hawks. The government revised upward its preliminary report on third-quarter GNP growth more than a percentage point to 4.3%. This followed news that the producer price index jumped 0.9% in October, its highest uptick since April 1981. Consumer prices rose 0.3% in October, up from 0.2% in five previous months. These developments, coupled with continued double-digit growth of the M1 money supply, a seemingly incorrigible government deficit, and a dollar that has fallen more than 20% since last February, lead some economists to look for almost a doubling of the current 3.6% inflation rate by the end of 1986. ''I'm not in the alarmist camp, but we could see inflation around 6% by the end of next year,'' says Robert Sinche, chief economist at Simms Capital Management. ''Disinflation is no longer an investment theme.'' Lawrence Kudlow, president of Rodman & Renshaw Economics of Washington, D.C., predicts inflation could hit 7% or 8% during 1987. |
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