I have been predicting deflation for some time in my The Peter Dag Portfolio. And now all the recent data suggest we are at the beginning of this dangerous development (see above chart). Dangerous for business and all of us.

Producer prices were down -4.1% y/y.
Consumer prices were down -0.03% y/y.
Prices of the broad PCE were down -0.1% y/y.

Now you understand why major corporations are cutting costs (people). Sales are not rising because of lower prices. Margins are shrinking.

If people find it harder to find jobs they cannot buy goods and services. Consumption grew at a meager 0.1% in September. And business will keep cutting costs due to lower sales and profits.

The business cycle will continue to slow down. A vicious cycle. Risky times ahead. Be careful.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Author, Profiting in Bull and Bear Markets

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