COLLEGE PARK, Md., Sept. 19 (UPI) -- News of August producer price weakening is strengthening analysts' hopes that the U.S. economy may avoid both inflation and recession.
"The stars are coming in alignment for a picture perfect soft landing," Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, said Tuesday.
"Moderating growth and inflation, and rising corporate profits will energize the stock market."
Morici also noted that since early August crude oil prices are down nearly $15 a barrel and gasoline has dropped more than 50 cents a gallon. Falling energy prices will reduce cost pressures on many businesses and moderating growth will stoke competition for customers. Pressure on wholesale prices should weaken for many commodities and services, he said.
"Inflation should cool significantly in September and October and the Fed should become more comfortable keeping interest rates at current levels.
"The growth side of the equation looks promising too. Falling energy prices should permit the economy to expand rapidly enough to lift corporate profits and stock prices but not so rapidly as to rekindle inflation. Fourth quarter and first half 2007 (gross domestic product) growth will be a bit above 3 percent."
