Good news: Prices are rising

Editor's note: Marc Leavy,CFP? is a regular financial columnist for Business Reform Magazine, the leading Christian business magazine with over 100,000 readers. Each issue features practical advice on operating successfully in business while glorifying God.

The markets mildly poked above the 9300 mark I wrote about last week. Volume was light and a more definitive move would have been nice.

The best news this week was the Fed did not lower rates or even hint at a rate decrease

The Consumer Price Index edged up 0.2 percent in July and the core rate, which strips out food and energy, also gained 0.2 percent. The core rate slightly exceeded economists’ expectations.

Wholesale prices nudged up by just 0.1 percent restrained by falling costs for food and moderation in energy prices. The Producer Price Index, which measures prices when they reach store shelves, jumped in June mainly due to energy prices.

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The slight rise in both these deflates the deflationary argument and signals an ability of companies to raise prices and increase profitability.

The Fed met this week and Chairman Greenspan indicated that rates may stay where they are for quite some time. Wall Street responded favorably to keeping the low rate environment and rallied.

Other economic indicators are showing signs of economic life.

Unemployment benefits edged up slightly but even with the rise, claims have been below the "discomfort" level of 400,000 for the last month, signaling stabilization in lay-offs.

The Empire State Manufacturing Survey's index of business conditions fell to 10.0 in August from 20.8 in July a decline that was larger than economists' expectations. Still, the index has remained above zero for four straight months, which suggests more companies reported improving conditions.

The dollar steadied against the major currencies. The euro fell to the dollar to $1.125. On a related note, the trade deficit narrowed as exports moved to their highest level in two years.

The August doldrums are coming to an end and we will move into the anticipated "last half of the year."

The U.S. gross domestic product grew at a 2.4% annual rate from April through June, up from 1.4% in the previous quarter. The economy has gained additional steam since then and economists predict an expansion rate of more than 3.5% in the remaining months of the year.

The end of 2003 and 2004 have been the focus of recovery for quite some time. Some economic tinders are kindling; however, how great the fire will be is yet to be seen.

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Marc Leavy, CFP? is a Certified Financial Planner. Principled Investing teaches Solomon's principles of investing and offers wisdom regarding comprehensive financial planning for a fee. You may contact Marc at [email protected] or visit www.principledinvesting.org.