Nariman Behravesh
Nariman Behravesh
Nariman Behravesh is Chief Economist at the consulting firm IHS Inc. and author of Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today's Global Economic Debates. Directing the entire economic forecasting process at IHS, he is responsible for developing the economic outlook and risk analysis for the United States, Europe, Japan, China and other emerging markets. He oversees the work of over 400 professionals, located in North America, Europe, Asia, Latin America, the Middle East and Africa who cover economic, financial...
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Record-high energy prices did not spill over into the rest of the economy.
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Perhaps the single best piece of economic news in 2005 was that record-high energy prices did not spill over into the rest of the economy. While the Fed can be relaxed about inflationary risks in the U.S. economy, its role is to preempt.
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Of that 8.9 percent, maybe a third of it was weather-related. The rest of it is underlying trend of weakness in the housing market. You are seeing pervasive signs of weakness.
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There is beginning to be evidence that high energy prices are starting to spill over into the rest of the economy.
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These high energy prices are beginning to spill over into the rest of the economy. Finally, airlines are able to raise ticket prices and hotels are able to raise room rates and on and on.
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The fact that we're not getting a spillover into the rest of the economy is pretty good news. The question that core inflation asks: Is the price of everything going to go through the roof? So far the answer is no.
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I think the way out of these deficits is that the U.S. currency will start to come down over the next two to three years.
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Record-high profits, combined with solid economic growth and rising capacity utilization will translate into robust capital spending - all good news for the industrial sectors of the economy.
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It is encouraging that core inflation in 2005 was no higher than the year before even though we had record oil prices. From that perspective, the Fed can feel confident that inflation won't get out of control.
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When it is up around 6%, it feels a lot worse.
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While inflation remains tame, inflationary pressures keep building. Thus, the Fed can't let its guard down.
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We are headed for a Katrina-induced soft patch, but I would not interpret this as the early warning of a recession.
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We are in a much more competitive environment than we were 20 years ago.
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We are just starting to see the impact of Katrina. We are going to see awful inflation numbers, awful employment numbers and awful industrial production numbers for a few months.