PPI
Inflation Acceleration Likely In 2011
Commodity Diffusion Index pointing toward higher inflation.
Mild Inflation, But No Deflation In 2010
We are maintaining our 2010 CPI estimate of +1.2%. (Core CPI +0.9%.)
Mild Inflation, But No Deflation In 2010
It may feel like a deflationary environment, but the CPI is not likely to end 2010 with a twelve month deflationary reading.
Year End Twelve Month CPI Deflation Reading Unlikely
Looking ahead to 2011, we are keeping a close eye on Housing, Food and Wages, which all could be bottoming out.
CPI Tame For Now, 2011?
Gently rising CPI inflation at present can be best characterized as normal business cycle inflation.
Mild CPI Inflation Expected In 2010
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation.
Mild CPI Inflation Expected In 2010
Mild CPI Inflation Expected In 2010 (+3.2%); Higher PPI Inflation (+6.0%)
Weak Dollar Could Continue To Contribute To Higher Commodity Prices
U.S. commodity prices are again trending higher, like they did in 2002, as the U.S. economy recovered. The weak U.S. dollar helped, and recent rally might not last.
Leuthold Commodity Diffusion Index Remains Negative
Like they did in 2002, as the U.S. economy recovered, U.S. commodity prices are again trending higher.
Mild Inflation Next Twelve Months
This transition from deflation to mild inflation will be a “numbers game” as late 2009 readings are compared against late 2008’s strong deflationary readings, driving the twelve month rate up.
Mild Inflation Next Twelve Months
By year end 2009, we expect the twelve month PPI to be back up in mildly inflationary territory.
Mild Deflation Short Term… Mild Inflation Next Twelve Months
This transition from deflation to mild inflation will be a “numbers game,” as 2009 readings are compared against 2008’s second half deflation, driving current twelve month readings up
Mild Deflation Short Term… Mild Inflation Next Twelve Months
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation. Trillion dollar deficits (or higher) may be acceptable shorter term (2009), but unless our government and politicians provide strong evidence of fiscal responsibility, the dollar’s respectability could be undermined, with foreign lenders and investors going elsewhere.
Mild Deflation Short Term… Mild Inflation Next Twelve Months
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation. Trillion dollar deficits, and higher, may be acceptable shorter term (2009), but unless our government and our politicians provide strong evidence of fiscal responsibility, the dollar’s respectability could be destroyed with foreign lenders and investors going elsewhere.
Expect To See Rising CPI/PPI Inflation As Economy Recovers
Rising food and energy prices will more than offset deflationary CPI housing subset, ultimately driving the twelve month CPI rate to +3.6% by mid 2010.
Expect To See Rising CPI/PPI Inflation As Economy Recovers
As the global economy recovers in 2010, we expect the PPI twelve month rate to accelerate to +5% as commodity prices continue to rise.
Fall To Deflationary Territory Should Be Short Lived
As first half of 2009 readings compare against inflationary 2008 first half readings, the twelve month rate will sink further into deflationary territory, probably to around –6%. But the second half of 2009 will be a different story, as commodity prices could continue to rebound or at least stabilize (anticipating economic recovery).
Fall Into Deflationary Territory Should Be Short Lived
CPI/PPI inflation readings are expected to dip into deflationary territory in the first half of 2009.
Fall Into Deflationary Territory Should Be Short Lived
Compared against very deflationary readings in the second half of 2008, PPI could finish 2009 up +2.0%. The worst of the commodity price downdraft should be behind us.
Decline Into Deflationary Territory Could Be Short Lived
2008 was a deflationary year for the PPI (–1.2%). 2001 was the last calendar year with deflation (-1.8%), and it was also a recession year.
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