Another timely and relevant observation from Chart of the Day:   On Tuesday, the producer-price index (PPI) for finished goods in March rose 0.7%. The PPI is now 4.92% higher than it was one year ago and significantly higher than the current 4.20% yield of the 10-year Treasury note.

Chart of the Day reports that while there have been some reports that
are predicting a slow down in global economic growth, today’s chart
illustrates that producer prices continue to rise at an above average
pace and that has tended to correlate with a struggling stock market.

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click for larger chart
Ppi_20050420

Ppi_20050420b_1

sourceChart of the Day

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In the 70s, high PPI clearly correlates with weak stock performance.
Same in the early 1990s, although the underperformance in 1990/1991 was
not nearly as awful as the 1970s. 

The PPI rise in 2000, while correlated with a struggling stock
market (to say the least!), was likely not the cause of the subsequent
market collapse.

The question now arises: Is the recent  rise in PPI most analogous to the 1970s, the early 1990s, or 2000?

 


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Source:
Chart of the Day
http://www.chartoftheday.com/20050420.htm?t

Category: Economy, Markets

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