Hello, I'm Mark Pearson. A slew of troubling developments this week cast a pall over the U.S. economy.
The Labor Department's Consumer Price Index -- the government's primary inflation yardstick -- advanced 1.1 percent in June. That's its largest monthly rise since Hurricanes Katrina and Rita battered the Gulf Coast in 2005.
At the same time, WHOLESALE inflation jumped by 1.8 percent last month. Over the past year, wholesale prices have risen 9.2 percent. That's their biggest gain in 27 years. Most of the rise was blamed on a 6.6 percent increase in energy prices.
And despite a massive infusion of cash in the form of government stimulus checks, the government's latest tally on retail sales revealed their worst showing in four months
As bad as all that sounds, there were actually more ominous economic developments this week. General Motors announced layoffs, the dollar hit a new low against the euro. And federal regulators seized the assets of IndyMac Bank making it the largest regulated thrift to fail in 20 years.
On Capitol Hill, a Federal Reserve recommendation to pump millions of dollars into mortgage lending giants Fannie Mae and Freddie Mac received mixed reviews from members of Congress.
Negative economic news dominated much of this week's headlines as the nation's banking and housing sectors came under increased scrutiny. On Capitol Hill, the Federal Reserve recommendation to pump millions of dollars in the direction of mortgage lending giants Fannie Mae and Freddie Mac received mixed reaction from lawmakers. Federal Reserve Chairman Ben Bernanke spent much of his time on Capitol Hill describing the current status of inflation.
Ben Bernanke, Federal Reserve Chairman: "The effects of the housing contraction and the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power even as they have boosted inflation.
Moreover, the currently high level of inflation if sustained might lead the public to revise up its expectations for longer term inflation. If that were to occur and those revised expectations were to become embedded in the domestic wage and price-setting process, we could see an unwelcome rise in actual inflation over the longer term."
Testifying to the Senate Banking Committee this week, Bernanke stressed economic struggles should be taken seriously despite the country falling short of the technical definition of recession. The U.S. would have to suffer two consecutive quarters of negative growth to meet that definition. Americans have yet to see even one quarter of negative growth.
Sen. Bob Casey, D-Pennsylvania: "How do we deal with this question of what is a recession and what isn't? And do we need some new definitions and some new terminology to better define what's happening to real families and real people?"
Ben Bernanke, Federal Reserve Chairman: "I agree with you entirely that, whether it's a technical recession or not, that the combination of declining wealth, a weak job market, rising food and energy prices, foreclosures, tight credit, all those things are putting tremendous pressure on families and explains why consumer sentiment is very low. People are very worried. So I certainly would never make the claim that, even if we were not in a technical recession, that it was not a serious situation."
Defining "recession" and finger-pointing were top issues throughout Washington this week. At the White House, President Bush tried to calm nervous Americans by proclaiming the American financial system "basically sound."
President George W. Bush: "And I can remember this press conference here where people were yelling, ‘recession this, recession that' as if you're economists. And I'm an optimist. You know, I believe there's a lot of positive things for our economy."
During a lengthy press conference, Bush parried a series of questions regarding mortgages, future government stimulus packages, and energy security.
The President reissued his call for offshore oil drilling and pushed Congress to follow suit with energy legislation. Congressional leaders have been slow to approach expanded oil drilling despite record gas prices. But some critics have blasted offshore drilling as an environmental risk that may not have a short-term affect on oil prices.