Each month I survey approximately 1,800 firms located in 12 states-9 Mid-American States & 3 Mountain States. The prices paid index from the survey tracks inflation at the wholesale level with an index between 50 & 60 pointing to modest inflationary pressures.
The prices paid index from the February Mid-American survey declined for the second straight month with a reading of 79.7, but still indicated significant inflationary pressures at the wholesale level. The prices paid index from the February Mountain States survey rose to 92.9, a ten year high reflecting rapidly rising prices for energy-related goods, commodities and other imported goods.
The Federal Reserve Open Market Committee meets again on March 22nd. Based on our survey and other regional and national surveys, it is almost certain that they will raise rates by at least 25 basis points, bringing rates to their highest level since September of 2001, In fact I place the likelihood of a 50 basis point increase at 10% and the likelihood of a 25 basis point increase at 85%.
This Friday's employment report from the Bureau of Labor Statistics (BLS) will be a very important signal for the Fed's next action. If the BLS reports over 200,000 jobs created for the U.S. economy for February, I expect the Fed to raise rates by 50 basis points, or 1/2%, at their March meeting. Go to www.outlook-economic.com for more details on my latest survey.
Ernie Goss, Ph.D.
Professor of Economics & President of NAPM-Nebraska