World Economic

Dow Chemical Co hiked prices on products used in everything from diapers to antifreeze. American Airlines wants $15 to check your luggage. Then there’s $4 gasoline and those rising grocery bills.

But for all the worry over inflation, the U.S. economy is actually in little danger of returning to the 1970s stagflation era of rising prices along with stagnant growth. There is one key ingredient missing — higher wages.

“It is utter nonsense, in our view, to be talking incessantly about stagflation,” Merrill Lynch economist David Rosenberg wrote in a note to clients, pointing to strong productivity gains and flat wages.

Three decades ago, when inflation was soaring and the U.S. Federal Reserve had to drive up interest rates to get it back under control, powerful unions had the clout to push for higher pay to compensate for rising prices.

That power is largely gone now.

“Instead of running out and going on strike for higher pay, people are adjusting by driving less, riding their bikes, car-pooling, or using mass transit,” Rosenberg said.

The end result is that the U.S online cash advance easy quick payday loans. economy will likely escape the vicious spiral of rising costs leading to wage increases and still higher costs. Instead, the pain of expensive food and energy will show up in the form of diminished household buying power, poor consumer confidence, and shrinking corporate profits as companies are forced to absorb the higher prices.

The Institute for Supply Management’s monthly survey of factory activity, released on Monday, tells the story quite plainly. Industries ranging from apparel to plastics — some 17 in all — reported paying higher prices for supplies. 

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