Green shoots with inflation?

By Peter Boockvar - May 14th, 2009, 7:45AM

In addition to the heated debate over whether the global economy is
experiencing a bottoming process or is just an inventory head fake, the
other discussion is whether the policies of the Fed and other central
banks will eventually lead to a period of high inflation. Inflation will
be a process not an event so not only do us gardeners have to look for
shoots in the economy, we have to also look for the ugly shoots of
inflation. Apr PPI is expected to fall 3.7% y/o/y but the core # is
expected to up by 3.4% y/o/y. While we’ve seen multiple negative m/o/m
PPI headline #’s over the past year, the core has not gone negative
since Oct ’06, notwithstanding the big declines in GDP in Q4 and Q1.
Thus any big moves of oil and food higher can really swing the debate.
Amazingly, crude is still near $60 even after the IEA cut its ’09 oil
demand estimate today to 83.2mm barrels per day, back to where it was in
’04 when crude averaged $43. Supply matters too.

PERMALINK
Category: MacroNotes.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

One Response to “Green shoots with inflation?”

Kent @ The Financial Philosopher Says:
May 14th, 2009 at 10:48 am
The operative word in the question over the arrival of inflation in this post is “eventually.”

Inflation does not seem highly likely in the near term especially considering that the deleveraging process for corporations and consumers alike will be a multi-year process.

With 20 percent of homeowners underwater, the most popular money tap in recent years, home equity, will be almost non-existent for quite some time.

While higher food and energy prices are inflationary, they also cut into the consumer’s spending on non-essential goods and services.

Of course, as long as the Fed has the power to print money, the long-term trend is inflationary. With large amounts of money being printed now, a higher relative level of inflation seems almost impossible to avoid… just not any time in the near future, which brings us back to your operative word, “eventually.”

“As life closes in on someone who has borrowed far too much money on the strength of far too little income, there are no fire escapes.” ~ John Kenneth Galbraith