The ECRI made headlines yesterday with their prediction of a global economic slowdown this summer. But there was an even more interesting topic within their commentary. They also believe inflation could be peaking as we speak. IBD detailed their position:
Reduced factory activity has had the benefit of bringing down the price of industrial commodities such as oil, copper and lumber. The growth rate of ECRI’s industrial commodity inflation index plunged to a seven-month low of 18.2% in May from 31.2% in April.
“Commodity price inflation is rolling over,” Achuthan said. “This is a classic sequence, and people need to start thinking about the scenario where global industrial growth once again starts to throttle back.”
Earlier this month, they reported a decline in their Future Inflation Gauge. This is one of the few reliable independent inflation indicators. The index is currently expanding at a 1.8% year over year rate – a far cry from the hyperinflationary calls that appear to be grabbing all the attention in recent months.
If the ECRI is right about their summer slowdown call and fuel prices peak at their typical summer peak (motor fuel has been driving the CPI higher almost entirely by itself) we’re likely to hear a lot of people apologizing for mocking Ben Bernanke’s call that inflation is likely to be transitory.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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