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Look as a higher gas prices fueling retail sales and inflation last month.
August retail sales jumped nearly 1% that was the biggest increase in six months.
But the spiking fuel costs also cost the cost of living to go up by six tenths of 1% last month and that was the largest -- Since June of 2009 how big of a concern is the spike in gas presses for economic growth joining us now -- probably done it senior US economist.
At Deutsche Bank -- great to see is he said earlier in our show you know those surveys were done when gas prices were certainly elevated but they're actually higher today.
So do you see the gas price story impacting any kind of economic growth we can cross our fingers and hope -- this juncture.
Good afternoon and thanks for having me back on the program certainly -- rising gas prices is troubling.
Thought we we were excited by the decline and not retail gasoline prices during the second quarter.
And that looked to be creating an economic tail wind that that could help accelerate the pace of activity especially household consumption.
In the second half of the year but that -- seems to largely be eroding now if we look at retail sales and strip out.
Component of that.
Data that was reported earlier today we still see -- so consumers are.
If we can't entirely -- the retail sales number up to gasoline prices but that's certainly that was a major factor.
And I think that that's just acting with a -- on consumption simply see further price increases.
-- for retail gasoline.
This is undoubtedly going to weigh on consumers over the next couple of months it didn't really show up in today's.
August report but I think we will see it in the next.
Month or two.
And what's your bad I mean what do you think is gonna happen to gas prices the head of the International Energy Agency saying today that he thinks.
Oil prices right now where they are unbearable and are going to stall the global recovery do you agree with fast.
Well I don't think they'll stall the recovery at this point but they certainly start to apply the brakes I think -- we start approaching five dollars per gallon on retail gasoline prices which where we're certainly a ways away from that on a national average basis at least.
That becomes that truly troubling for economic prospects as as -- now -- -- merely slowing down the pace of consumption so -- it yes it is the problem.
-- not quite as critical -- as those headlines you mentioned.
Yet says these elevated -- elevated costs for food and energy we're seeing some food inflation in there as well.
It curb what Bernanke's trying to do obviously the big headlines DC the markets and a big way today.
Well chairman Bernanke is trying to stimulate economic activity so certainly higher inflation does that create a damper.
But in terms of thought the Fed reaction function and fed policy making they are focused on the unemployment rate -- the labor market much more than the inflation side of their mandate after all we look at the inflation metrics even in today's data.
Headline and core inflation are running relatively close to the Fed's target of 2%.
But on the unemployment front we are clearly.
Widely missing the F fed set -- goal of let's say five and a half to 6% unemployment so it's really going to be.
The labor market developments that dictate that future fed actions not much more so than these inflation numbers what.
Question where do you -- where do you see the labor market going I mean are you concerned that as we watch these pictures of the eruptions in the Middle East.
That is gonna push oil prices higher stalling the recovery the labor market you know wasn't really turning around we weren't seeing the pick up we needed I mean I'm starting get really concerned.
That this recovery is about to -- and turn in the other direction.
Would you say that your concern your watching and I mean how would you characterize.
What you -- you -- a lot like chairman Bernanke had.
Concerned about the recovery stalling and that that's why they did take the actions when they did even though was awkward to do that they're very shortly before the the congressional and presidential election.
Even though it may or may not have any type of an impact at all I mean going out buying mortgage backed securities I'm not sure how that's gonna help the unemployment situation or the gas price situation.
In fact -- me -- -- -- gas prices worse because it devalues the dollar.
Whether it works or not chairman Bernanke and that his colleagues that the Fed believe that it does work and so they've not talked about -- -- -- of quantitative easing and actually have ventured to estimate -- what the benefit was too well overall economic output in fact if they add up QE1.
They estimate that that added about three percentage points to -- GDP so that I think that this medicine works and that's why they're using it.
I know but -- we're out of time you answer the question are you worried are not worried how would you characterize -- absolutely I'm worried about gas prices and a lot more worried about the fiscal cliff okay great.
Some are actually joining us pandora's box without -- they don't want for --
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