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Hartford: Inflation Could Soon Come Back

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NU Online News Service, Aug. 18, 2003, 12:58 p.m. EDT – Inflation may soon roar back, according to analysts at a unit that manages bond portfolios for Hartford Financial Services Group Inc., Hartford.

Although the cost of goods included in the U.S. Consumer Price Index has increased only 0.4% over the past 12 months, the cost of services has increased 3.3%, the Hartford bond unit analysts write.

The analysts note that the Producer Price Index figures, which serve as a benchmark for the prices that businesses pay, look particularly grim: Although the price index for finished goods has increased only 2.4% over the past year, the “Crude Goods Index,” which represents the cost of the fuel, wood, cotton and other goods used to make things, has increased 18%.

So far, competition has forced retailers and manufacturers to hold down retail prices, but, eventually, consumers are bound to feel the effects of the steep increase in crude goods costs, the Hartford analysts warn.

“Investors should be reminded of inflation’s history, identify where it exists today and remember that ignoring the potential for future inflation may lead to dire consequences,” Bill Davison, managing director of the Hartford bond unit, says in a statement about the latest inflation figures. “While inflation has been approximately 2% over the last 12 months, we believe it has bottomed and will slowly increase as the economy gains further momentum.”