Tuesday, March 17, 2009

PPI update

The thing to watch these days is core (ex food and energy) prices, since headline measures of inflation are being dominated by the big drop in energy prices. At the producer level, core prices are still rising. This is extremely important because it shows that we are not in a deflationary environment. Fear of deflation and fear of a continuing economic decline is what has contributed signficantly to the market's paralysis in the past several months. The more news like this we see, the more confident we can be that we have seen the worst of the economic news and can expect a bottom in economic activity before too long. I'm sticking with my year-end prediction that the bottom will come before mid-year.

1 comment:

Anonymous said...

This is great news. I agree, on the Real Estate front the big news is the Surge in Housing in the last 2 months. Now we won't see a jump in the Real Estate front but a stabilization would be very healthy for our economy as a whole. Good insight.