Inflation and the economy

The Labor Department says the Consumer Price Index rose 0.2 percent in May. That's down from April's 0.4 percent increase. Food costs rose 0.4 percent. But energy costs fell 1 percent, the first drop in nearly a year.

In the past 12 months, consumer prices have increased 3.6 percent, the biggest gain since October 2008.

Business cycle history shows quite clearly the higher inflation goes, the more pronounced is the next economic slowdown.

Why? Because of the damage to the consumers' purchasing power.

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George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

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