Inflating the Future?

Is deflation over?

Source: BGAEconomic.com

Around the world markets have been worried about deflation. And the latest CPI release seems to validate these worries. Year-over-year, inflation is flat. And it was flat last month as well. Are we about to turn Japanese, struggling with deflation, where folks stop buying because things just get cheaper every month?

Probably not. The latest headline inflation numbers have been depressed by oil prices. Core inflation–excluding food and energy prices—has been running about 1.5%. And lately, it looks like it’s been trending ever-so-slightly higher.

Source: BLS

How could core prices in the US be rising, when around the world, they’ve been falling? The answer may lie in the delays that plague government data. The Labor Department and Commerce Department employ hundreds of surveyors who sample tens of thousands of prices every month—everything from legal fees to kumquat prices. They compile that data and put weights on it. The whole process takes over a month. The government has done it this way for decades.

But there’s a better way.

Some researchers have created screen-scraping algorithms that automatically collect billions of prices off the internet—from Amazon to Zillo—and let their computers compile the index. It’s far more data-intensive, and a lot more timely. These data indicate that deflations pressures may have bottomed. Indeed, it looks like prices are headed back up.Month-over-month Inflation. Source: PriceStats

So it’s a good thing the Fed’s been telling us they might not be so patient. Because if prices keep rising, their rates will too.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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By | 2017-07-17T12:23:00+00:00 March 25th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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