May 15, 2003
Told you so: Deflation
Told you so: Deflation
The Producer Price Index fell dramatically last month, almost as much as after the WTC attacks. Since the beginning of the year, I've been cautioning that the U.S. economy, along with most of the world, is being pulled into a deflationary suckhole. The PPI data seems to confirm this warning. The Federal Reserve chimed in, too, saying:
The index for business equipment moved down 0.5 percent in April and stood 2.5 percent below its level in April 2002. Declines were widespread across categories, with the output of transit equipment, particularly motor vehicles, recording the sharpest decrease. Information processing equipment ticked down after having posted a sizable gain in the previous month, and industrial and other equipment edged down for a second month.
While the short "war" had some serious impact on business, the threat is that people will start waiting for prices to fall further. Every region seems to reflect a terrible malaise, and companies are telling me their projections are falling rather than rising.
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