Deflation Watch

Will Central Bankers Continue to See Lackluster Inflation Data?

You're probably aware that the Federal Reserve engaged in unprecedented stimulus efforts to combat the Great Recession (2007-2009) and jump-start the economy through buying mortgage-backed securities and Treasuries.

The May 2016 Elliott Wave Financial Forecast said:

No matter how hard they huff and puff, economists and central bankers just cannot get the data to comply with their inflationary goals and expectations.

With the above quote in mind, read this excerpt from a July 15 Morningstar article titled "Another Bout of Deflation Ahead?":

We had three important economic reports on Friday [July 14]: more deflation news, poor retail sales data, and glacially improving industrial production. Markets seemed to take the poor numbers in stride, assuming that a lot of the issues, especially the deflation figures, were transitory. (U.S. Federal Reserve Chair Janet Yellen used that very word.) We agree that lots of funky things are happening with cellphone service pricing and the seasonal nature of healthcare price increases. Still, car prices are falling (both new and used), food prices are down again, and the price almost any physical good is still falling. Even some service categories are showing sustained deflation, including airline tickets. With soft retail sales data this week changing consumer tastes and the Amazon factor, low prices aren’t a total surprise. Pushing prices higher may be harder than the Fed believes. That may be a good thing given last week’s uninspiring wage growth data sets.

After the trifecta of lackluster reports, GDPNow of the Atlanta Fed has cut its estimate of second-quarter GDP down to 2.4% from 2.7%. …

Month-to-Month Data Shows Deflation in Three of Past Five Months

The all-item CPI was down fractionally in June compared with May, making for deflationary reports for three of the past five months. And none of these, not one, showed growth an annualized growth rate of greater than 2%. Granted, the large drop in March was indeed due to the oft-cited cellphone service price drop, but those should have worked out of the month-to-month numbers by now (though they will cast a shadow over the year-over-year numbers through at least next February).

You can read the entire article by following the link below:

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