But Does it Spell S-t-a-g-f-l-a-t-i-o-n? Per a report released yesterday by the Bureau of Labor Statistics (BLS), wholesale prices in the U.S. leapt by 6.3 percent, the largest calendar year increase since 1981. The surge was lead by a 18.4 percent increase in energy costs, with gasoline prices up 37.1 percent. Producer food prices increased 7.4 percent in 2007, the largest hike in four years. These increases are worrisome, especially against the backdrop of the broadly forecasted economic slowdown, if not recession, for 2008. But does this mean we are entering a period of stagflation, a combination of inflation and growth stagnation? If so, that would greatly complicate the fiscal and monetary policy mix in an economic stimulus plan. Bear in mind the critical difference between producer and consumer -- between PPI and CPI. The difference is not too comforting at first blush. Today, BLS announced that CPI rose 4.1 percent in 2007 -- the largest 12-month rise since 1990. But "core" inflation -- CPI minus changes in food and energy costs -- increased by only 2.4 percent in 2007, a deceleration from the 2006 core inflation rate of 2.6 percent. On balance then, private analysts are saying, the latest producer price figures likely would have little impact on concerns about rising inflation. So, as an AP report today indicates, "Analysts said that with core prices generally remaining well-behaved, it will give the [Federal Reserve] bank the leeway to cut interest rates further to battle a serious economic slowdown" -- meaning that despite the significant jump in both producer and consumer price inflation in 2007, there is little worry about stagflation... for now.