Friday, March 30, 2007

Deja Vu Stagflation and the Savings Rate

Real disposable incomes (inflation-adjusted and after taxes) increased 0.1%, matching December with the lowest in nine months. A puny gain for sure and a possible sign that it could be negative next month. A sign of Stagflation?

Real (inflation-adjusted) consumer spending growth slowed to 0.2%, the weakest gain since August. Spending had risen 0.3% in January. Another potential bad sign.

The Fed could soon be facing both accelerating inflation and a slowing economy. And, this is my expectation.

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