The Labor Department reported this week its consumer price index rose by 4.1 percent last year, up sharply from 2006. Energy and food prices both jumped by their largest amounts since 1990.
Meanwhile, the Commerce Department reported retail sales dropped 0.4 percent in December, wrapping up the weakest sales year since 2002. Coupled with higher prices, the threat of a cutback in consumer spending prompted fiscal policy makers to send out distress signals.
President Bush called on Congress to deliver an economic stimulus package to his desk quickly. And many economists predict the Fed will slash its key interest rate by a bold half-percentage point later this month.
All the economic upheaval ran the bulls off Wall Street, where the Dow lost more than 400 points for the week.
Regardless of government intervention, motorists continue to endure higher fuel prices. While crude oil prices have declined in recent weeks, gasoline prices increased more than 35 percent last year. And the trendy color at this week's Detroit Auto Show was green.
With the need to satisfy a 35 mile-per-gallon fuel efficiency standard in just 10 years, an industry not known for turning quickly appears to be working on meeting consumer demands as well as government mandates. The methods of achieving higher gas mileage vary. Some companies are putting diesel engines under the hood. Others are using combinations of batteries and gas engines in hybrid- electric configurations. And still others, brought out more flex-fuel models capable of running on 85 percent ethanol.
To show an even greener persona, General Motors took advantage of the show to announce a partnership with cellulosic ethanol producer Coskata. Based in Illinois, the experimental ethanol company intends to use feedstocks other than corn including crop residue, wood chips, scrap plastic, and municipal waste. The start-up company will build a pilot-scale plant this year and plans to be fully operational by 2010 or 2011. Company officials believe the fuel will cost 50 cents to $1 less at the pump. Coskata's success could mean the end to the lingering question of how to transport ethanol long distances because the plants could be built closer to larger population centers where more of the fuel is needed.
GM, which did not disclose the amount of its investment, lays claim to having 3.5 million flex-fuel vehicles already on the road. By 2010, the carmaker plans to produce 800,000 flex-fuel vehicles a year.