Where will momentum carry the economy?

Higher inflation "has been set in motion," James Marple, senior economist for TD Bank Group, tells clients in a new report.

Oil prices bounced back up 70 percent from May to February; he expects they'll rise modestly into next year, boosting price levels generally.

Higher prices aren't all bad: "Wage pressures have been building," too, Marple adds, with median pay for people with jobs up 3 percent over the past year, faster than economic growth.

Berwyn-based food analyst Jonathan Feeney tells his clients at Athlos Research to brace for rising prices on foreign grain, meats, and sweeteners.

The Federal Reserve and other central banks have "somewhat desperately" tried to keep money cheap for investors - but investors are using those low rates to pump their capital into real estate and third-world commodities, not factories or jobs-producing domestic investment, Feeney tells me.

Indeed, by some measures U.S. capital investment is still stuck at recessionary levels. Smartphone apps and other new tech haven't boosted worker productivity, reports Satyam Panday, economist at Standard & Poor's.

Instead, property speculators bought a record $35 billion worth of U.S. apartment buildings in the first three months of this year, noted Sean Coghlan, research director at JLL Capital Markets.

Rising prices will encourage the Fed to go ahead and boost interest rates more - driving up borrowing costs and feeding inflation again, says TD's Marple.

What's going to happen when rates go up - maybe twice this year, and more next year, as many Fed-watchers predict?

"The usual knee-jerk reaction," says Howard Trauger, president of the Bond Club of Philadelphia and managing director at the Philadelphia office of $1.2-billion-asset Carnegie Investment Counsel: "More people will buy bonds and bank deposits."

"Keep in mind that many of our elderly would welcome and appreciate the boost to their incomes" that higher interest rates will bring, Trauger adds.

Borrowers won't be so happy. About one-fifth of U.S. state and local governments face obligations that are growing faster than their tax collections, warns Tom Kozlik, muni-bond strategist at PNC Capital Markets in Philadelphia. Higher rates will strain badly balanced budgets in states such as Pennsylvania and New Jersey, he says.

Not everyone is worried about prices rising. Larry Summers, Main Line-bred ex-economic wizard to former President Bill Clinton and President Obama, warns that the world still suffers from "secular stagnation," the glut of capital and lack of consumer and business demand that is supposed to have helped provoke World War I and the Great Depression.

His solution: Fix roads and bridges, ports and airports, electronic communications - like what Congress mostly refused Obama in the Great Recession.

Much of the technology that companies are paying for "seems increasingly to be focused on replacing humans with robots," notes economist Ed Yardeni in one of his daily report to clents.

Amazon.com is putting packing robots in warehouses; Vanguard Group is deploying "robo-advisers"; Google and Tesla are into driverless trucks.

The "disruption" preached by venture investors scares smaller companies, Yardeni adds: Bosses "must be asking themselves, 'Do we want to invest in capital that might turn prematurely old before we earn a proper return?' "

What's really going up fast is borrowing money: Consumers and businesses have lately taken on debt several times faster than the economy is expanding.

Fed loan data show total bank lending is up 8 percent from last year. Business lending was up nearly twice as fast; consumer lending (credit cards, but not home loans) has been going up even faster, analyst Christopher Donat writes in a report for Sandler O'Neill + Partners, New York.

When borrowing grows faster than income, don't loan defaults follow? Banks posted a nearly 50 percent jump in "nonperforming assets" in the first three months of 2016, writes analyst David Hilder in a report to clients of Philadelphia-based Drexel, Hamilton & Co. But problem loans are isolated in oil and gas; losses are still way below recession rates.

Private debt payment pressure is a bigger reason firms aren't investing more at home, argues Philadelphia investor Richard W. Vague. He wants U.S. lawmakers to make it easier for banks to write down troubled home and business loans, in exchange for minority equity ownership, as a way to erase debt and stimulate U.S. private business investment.

That's still a lot of steps short of presidential candidate Donald Trump's call for crisis "haircuts" on U.S. Treasury bondholders, which economists say could drive interest rates a lot higher.

JoeD@phillynews.com

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