Growth And Inflation Aren't Twins
May 1, 1998
Many economists had expected a first-quarter growth rate of an annualized 3.2 percent, with an annualized 1.3 percent rise in overall prices. But that's not what happened.
- In its advance report, the Commerce Department said real GDP grew at an annualized rate of 4.2 percent in the first quarter -- 1.9 points lower than it would have been without the Asian crisis.
- But the overall price index grew at an annualized rate of only 0.9 percent -- the lowest in almost 34 years.
- Moreover, the price index for gross domestic purchases -- which measures prices actually paid in the U.S. -- was unchanged from the prior quarter, the first time that's happened since 1954.
Some economists reflect that President Ronald Reagan recognized that inflation was not the obstreperous twin of growth. Instead, inflation is a monetary issue. It arises when the government prints too many dollars for the amount of goods available.
Source: Editorial, "Growth Does Not Equal Inflation," Investor's Business Daily, May 1, 1998.
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