Marketplace Report: NYSE, Income, Mortgages and Inflation

The index of the New York Stock Exchange has recently seen a dramatic rise, closing in on a record high. Janet Babin of Marketplace talks with Madeleine Brand about some of the reasons behind the spike, and about the latest economic news on personal income, mortgage rates and inflation.

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MADELEINE BRAND, host:

Back now with DAY TO DAY. The Dow Jones Industrials have been flirting with new highs this week. Investors may be excited, but overall the nation's economic picture remains mixed. MARKETPLACE's Janet Babin is here. And Janet, what do the experts say about all these mixed economic signals?

JANET BABIN: Well, Madeleine, apparently indicators going in different direction makes sense to economists. They say it's natural for some sectors to be down while others are up. Today from the Commerce Department we learned that consumer spending in August was weaker than economists had expected it would be, even though the University of Michigan Consumer Sentiment Report out today found that the economy continues to expand.

And as you said, the Dow Jones Industrial Average has been on the upswing. Yesterday the Dow closed within a few points of the all-time closing record set back in January of 2000.

BRAND: Well, let's talk about inflation - so-called core inflation, and that excludes food and energy. That was up about 2.5 percent. Is that worrying economists?

BABIN: That is. That number caught everyone's attention because core inflation here hit an 11-year high, and certainly the Federal Reserve would like to see that core inflation number lower, between one and two percent, and we've been running north of that percentage for well over a year despite the Fed's efforts to reign in the money supply. They've increased interest rates 17 times since 2004. I spoke with an economist at Standard and Poor's, though, and she doesn't think the Fed's going to raise rates again through the end of the year.

BRAND: Well, okay. Overall, then, is this an official slowdown?

BABIN: Yeah, it kind of depends on who you talk to. According to economist Richard DeKaser with National City Corporation, this is a slowdown. I asked him to try to explain the economic numbers like he would to his 10-year-old daughter.

Mr. RICHARD DeKASER (Economist, National City Corporation): We've begun a period of slower growth after about three years of pretty strong economic performance, and while that may be very concerning, the whole point of the slowdown is to prevent the economy from experiencing those kinds of inflationary problems that have been the end of economic expansions in the past.

BABIN: So Richard's daughter was apparently quite intelligent when she was 10 years old. But yes, DeKaser does believe this is a slowdown for our own good, and in the past few weeks we've heard from some economists that the Fed has taken rate hikes too far, and that's why we've seen weakness in the housing market and a drop in mortgage applications. But DeKaser disagrees with that.

Coming up later today on MARKETPLACE, we'll find out why the CIA is having a tough time recruiting new agents.

BRAND: Thank you, Janet. Janet Babin of public radio's daily business show MARKETPLACE, produced by American Public Media.

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