Inflation

NEW YORK -- Stocks are heading lower as investors look for new clues about how the economy is faring. Investors are pausing after two days of buying as the Labor Department says a measure of inflation was flat in July after a slight increase in June. The market appears little fazed by a report showing production from the nation's factories, mines and utilities rose more than expected in July. It was the first gain in nine months as auto companies increased their output. In the first few minutes of trading, the Dow Jones industrials are down 33 at 9,364.

U.S. shoppers faced moderate price rises in December, but that capped a year in which prices soared at the sharpest rate in 17 years, pressuring households also dealing with a steep housing downturn and tighter credit. The Labor Department said Wednesday that its consumer price index rose 0.3% in December, less than half November's 0.8% jump. But for all of last year, the key measure of inflation rose 4.1%, well ahead of the previous year's 2.5% gain and the steepest since 1990.

Feuding Mexican food manufacturers and supermarket chains agreed Wednesday to split the costs of a program aimed at cutting grocery bills for millions of shoppers. Under the deal, business leaders agreed to support the government's call to help keep inflation in check by lowering prices temporarily on staples such as powdered milk, eggs, rice and chicken. At the government's urging, Mexico's big grocery chains this month slashed prices on dozens of products through the end of March.

China's inflation rose to its highest level in more than 11 years in January after devastating snowstorms worsened food shortages, according to data reported Tuesday, and analysts warned there might be sharper increases to come. Consumer prices in January climbed 7.1% from the same month last year, driven by an 18.2% rise in costs, the National Bureau of Statistics reported.

An ominous scenario of rising prices and slowing growth showed itself in spades Wednesday as the government reported that consumer prices are rising at a fast pace even as the housing sector remains stuck in its worst slump in a quarter-century. The combination of inflation and faltering growth -- the infamous "stagflation" of the 1970s -- creates a potential double bind for economic policymakers: Fight one and risk feeding the other.

Rising food prices drove inflation in Mexico to an annualized rate of 4.95% in May, the highest level in nearly 3 1/2 years, according to data released Monday by the nation's central bank. It's the fourth consecutive monthly increase and a bigger jump than analysts had predicted. The rate now stands well above the nation's 3% long-range inflation target, and for the last two months, it has hovered in the 4.5%-to-5% upper limit of what the government considers acceptable in the short run.

Mexico's central bank raised its benchmark interest rate by a quarter of a percentage point to 7.75% on Friday, citing fears of inflationary pressures that have sent food prices spiraling upward. It was the first hike since October, when the Bank of Mexico raised the overnight lending rate by a similar amount in the face of rising consumer prices.

They left the Nile Delta before dawn, piling into a van and driving across the green flatlands toward the coast, plopping on the sand and diving into the surf, watching the sun rise over the jetties and trawlers churn the horizon. There are 11 of them -- cousins, mothers, friends and kids.

Worried about rising inflation that is bedeviling the nation's households, Mexico's central bank on Friday raised its benchmark interest rate to 8%. The 0.25-percentage-point hike in the overnight lending rate was the second in less than a month, underscoring the Bank of Mexico's concern over rising consumer prices that have shown no sign of easing. The peso strengthened to a five-year high against the dollar on the rate news, boosting Mexicans' purchasing power -- at U.S. tourists' expense.

Even in the midst of a severe meltdown on Wall Street, Federal Reserve officials at their September meeting believed the risks from weaker growth and higher inflation were roughly equal. The Fed officials discussed the financial turmoil during their closed-door meeting Sept. 16, according to minutes released Tuesday. The meeting occurred the same day that investment bank Lehman Bros. Holding Inc.