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|  Segment# |

| 2 |

| Location |

|  |

|  Date |

| 2/26/2008 |

| |

|  Story Name |

| TOUGH TIMES STAGFLATION |

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|  Notes |

|  |

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|18:33:09 |

|Prepared by The Transcription Company, , (818) 848-6500 |

|Which takes sole responsibility for accuracy of transcription |

|18:33:09 CHARLES GIBSON |

|(OC) Well now, to the economy. And a word not heard since the 1970s. |

|STAGFLATION. That occurs when prices go up just as the economy slows |

|down. STAGFLATION plus inflation. |

|GRAPHICS: PRODUCER PRICE INDEX |

|18:33:21 CHARLES GIBSON |

|(VO) And the government reported today that wholesale prices shot up 1% |

|in January. And are now up almost 7.5% in the past 12 months. ABC's |

|David Muir is joining us now. David? |

|18:33:33 DAVID MUIR, ABC NEWS |

|(OC) Good evening, Charlie. The inflation you speak of this evening is |

|growing at a rate not seen since 1981. And consumers are really beginning |

|to feel it across the board. In fact tonight, a new ABC News poll, of |

|consumer confidence, shows Americans are feeling the worst they have felt |

|about the economy in 14 years. |

|18:33:50 DAVID MUIR |

|(VO) From getting groceries to getting gas, to just plain getting better. |

|The new numbers show inflation is rising at its fastest rate in nearly |

|three decades. Wholesale prices, what companies and stores pay to stock |

|their shelves, are rising dramatically. The wholesale price of eggs, up |

|60% year-to-year. Pasta, up 30%. |

|18:34:12 PEDESTRIAN |

|I notice it on eggs. |

|18:34:14 PEDESTRIAN |

|Oh, everything - everything is so expensive now. |

|18:34:17 JOSEPH LAVORGNA, CHIEF ECONOMIST |

|We are seeing inflation really across the board - food, energy prices. |

|We're seeing higher motor vehicle prices. Certainly pharmaceutical |

|prices. |

|18:34:27 DAVID MUIR |

|(VO) Just today, oil set a record high. A barrel of crude closed at just |

|over $100. And what so worries economists, is that potential dynamic, |

|STAGFLATION. |

|GRAPHICS: STAGFLATION |

|18:34:38 JOSEPH LAVORGNA |

|Current environment is similar in style to the late '70s, early '80s, in |

|that inflation is high and rising and the economy is weak and slowing. |

|18:34:49 DAVID MUIR |

|(VO) Today, Home Depot posted its first-ever drop in sales for last year. |

|Profits down more than 27% in just the last quarter. Contractor Raul |

|Gonzales shops there. The problem is, his own phone isn't ringing. |

|18:35:04 RAUL GONZALEZ, CONTRACTOR |

|If I have less work, I'm buying less materials. |

|18:35:06 DAVID MUIR |

|(VO) So, what to do? Congress already pushed through a stimulus |

|package. And the Fed will likely cut rates again. Why if it could lead |

|to even more inflation? Well, as one economist said today, you've got to |

|tackle the economy itself first, inflation later. |

|18:35:20 ANNE MATHIAS, RESEARCH DIRECTOR |

|It is much easier for the Fed to tackle high inflation than it is for the |

|Fed to try to resuscitate an economy on its death bed. |

|18:35:29 DAVID MUIR |

|(OC) And that right there was the consensus in talking with economists |

|today. That the sluggish economy is the bigger issue to tackle here. |

|That inflation can be tackled down the road. The problem is, that's the |

|economists' view. In talking to the folks at the grocery store, the gas |

|pumps today, they're all asking for relief now, Charlie. |

|18:35:45 CHARLES GIBSON |

|(OC) All right. David Muir on the economy tonight. |

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