Wholesale inflation increased 2007 by the largest amount in twenty-six years. The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.
Meanwhile, the Commerce Department reported that retail sales fell by 0.4 percent in December. It was a worse-than-expected decline and increased worries that the country could topple into a recession.
The combination of rising inflation pressures and a weak economy represent a dilemma for the Federal Reserve over whether to cut rates to boost economic growth even at the risk of making inflation worse. Last week, however, Federal Reserve Chairman Ben Bernanke sent a strong signal that the Fed is more worried at the moment about weak growth than inflation -- given a series of weaker-than-expected data in recent weeks.
Business confidence is essential now as business capital investment helps lead the manufacturing sector and the economy overall.
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