Inflation numbers due; Stocks fall, oil drops

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The U.S. economic downturn gained steam yesterday, with a report of the highest inflation since the early 1980s, more bad news for banks and automakers and a suggestion by the Federal Reserve chief that worse days are ahead.

The Labor Department releases the June Consumer Price Index at 8:30 a.m. EDT. Wholesale inflation, driven by skyrocketing gas and food costs, rose by 9.2 percent for the 12 months ending in June the fastest pace since the summer of 1981, during another energy crunch.

At the same time, consumers hit the brakes hard despite a massive infusion of government stimulus checks. Retail sales turned in their poorest showing in four months.

Yesterday, Bernanke told Congress the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps.

Today's decline in stock futures comes a day after Wall Street closed mostly lower and the Dow Jones industrial average logged its first close below 11,000 since July 2006.

By midday in Europe, light, sweet crude for August delivery was down S1.56 at $137.18 a barrel in electronic trading on the New York Mercantile Exchange.

President Bush sought to bolster confidence yesterday by declaring that the financial system was "basically sound," but he conceded: "It's been a difficult time for many American families."

Bernanke delivered a somber midyear outlook to Congress, saying the U.S. faces "numerous difficulties" despite the Fed's interest rate-cutting campaign, which began last September in hopes of preventing a recession.

Bernanke said the Fed expected the economy to grow for the rest of this year "appreciably below its trend rate." He cautioned inflation was likely to move "temporarily higher" in the near future.

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