Report: Economy lost speed in summer

There was some concern raised Monday with the release of the latest Economic and Revenue Update by the state Economic and Revenue Forecast Council.

The larger news out of the update concerned the state’s economic recovery. According to the report, it “seems to have lost momentum in the summer months after strong growth in the spring.”

Also in the report was the bullet point: “The Seattle Consumer Price Index showed outright deflation in the first two quarters of 2010.”

Arun Raha, the state’s chief economist and head of the forecast council, stepped back a bit from the statement later Monday.

Rather than deflation – a full decrease in prices – he offered a more moderate term. “You can call it disinflation,” he said.

The Bureau of Labor Statistics, in a July report on the Consumer Price Index in the Tacoma-Seattle-Bremerton area, said there had been a 0.5 percent annual decline in prices in the period ending in June. This followed annualized increases of 0.6 percent and 0.3 percent in February and April.

“There would really have to be a sustained period of several months before you would want to say there’s outright deflation,” said Todd Johnson, a BLS economist based in San Francisco.

For both inflation and deflation, he characterized any numbers above or below a full 2 percent as “benign.”

True deflation, he said, “may scare people.” The Japanese economy suffered a deflationary spiral in the early 1990s and took years to recover.

Raha said Monday that the U.S. economy is not in jeopardy from such a spiral because of demographics and regulatory control, among other factors.

New reports are due this week both from the BLS and the forecast council.