SURVIVING INFLATION

摘要

What does an investor do next? U.S. stocks have had a rough first half, with the Dow Jones, Standard & Poor's and Nasdaq indexes flat or down. Other markets, particularly in the emerging sector, are extremely volatile. To answer the question, let's first look at the cause of the turmoil. The fear of increasing inflation and higher interest rates, spurred on by lofty energy and commodity prices, are the main culprits. Inflation in the U.S. is spreading into such places as manufactured goods, imports and airline fares. Compounding the problem in the U.S. is the continued rise in employment and the pressure this puts on labor costs. Ditto capacity. Capacity utilization in the U.S. is at 81.7%, up from 73.9% in December 2001, which has to be taken as a warning light for rising inflation. It is a sign of heavy demand, which enables manufacturers to make higher prices stick.