With interest rates pushed to some of the lowest levels in recent memory and with federal deficits returning to high levels over the past few years, it was only a matter of time before concern about inflation materialized. The recession and aftermath of September 11th created concern for falling prices, particularly for wealth-holding assets other than stocks; the appropriate policy posture for deflation is expansionary monetary and fiscal policy. Still, early signs of possible price increases appeared for scrap steel and other raw materials.
China, increasingly a major world manufacturing center, has increased world demand for many raw materials. These initial price increases have had minimal impacts on the U.S. Productivity gains in the U.S. have kept inflation in check, but, as the U.S. and other economies step up their rates of growth, demand is pushing prices further upward, while domestic productivity shows signs of slowing. As a result, we might expect increased rates of price appreciation. The Consumer Price Index (CPI) increased in one month by an annualized rate of 3.6 percent; the CPI is up 2.3 percent over year-ago levels. One-month rate increases are not enough for a trend, but concern for inflation is now a reality.
The upward movement in raw materials is a boon to rural Nevada’s resource-based economy. Urban Nevada (Las Vegas and Reno) continues to experience growth. For example, taxable sales were up 14.5 percent and 8.8 percent over year-ago levels for Clark and Washoe Counties, respectively. Gaming revenues continue to grow at double-digit rates for Las Vegas.