Michael Kelly Mort Kondracke Ch. BAD CPI and PPI reports for the month of January have sent a stagflationary shiver through the financial markets. I can buy the stag, but not the flation. The stagnant economy is best illustrated by the continued drop of industrial production, which has fallen four consecutive months.
Production is the single best coincident economic indicator.
Two more monthly declines might well spell recession. Lower tax-rates to put more cash in consumer pockets and improve rewards for investment spirits and producer incentives will solve the stag problem. As far as the inflation threat, every commodity price on the planet is falling. If the Fed looked forward at the implied forecasts of market price indicators, instead of backward at flawed statistical reports, it would see declining future inflation and recognize the need to inject considerably more liquidity into the sinking economy. Take a look at the commodity charts.