Contrary to some monetary policymaker protestations, we believe the rise in food and energy costs is highly unlikely to be temporary. Food and energy prices are extremely volatile, but this does not mean that these prices tend to decline.
Meanwhile, when government reports “core” inflation, they leave out food and energy price increases, and as a result, when it reports GDP it leaves those numbers in. This results in prices appearing to be relatively “stable” while the economy is “growing,” when in fact, prices are fluctuating and growth is slowing.
That is the real story behind the numbers that will go underreported in the mainstream media. This is not growth accelerating at all. It’s inflation.