FIBER’s Leading Inflation Index reaches
a “moment of truth” with an uptick to 100.1 in December, 2.1 points
above November. Six-month smoothed growth rates move up to –5.2% from
November’s –9.7%. We continue to follow the inflation cycle that helped
bring an end to the 1960s expansion with the index peaking at 106
and then rapidly falling to below 100 before turning back up. The
1960s moved up for one brief month before resuming a fall to below
92 before the December 1969/November 1970 recession ended. The July
1990/March 1991 recession was preceded by seven months of a moderating
and slightly increasing inflation index before the recession started.
The index didn’t begin to ease until three months after this recession
had begun and then dropped to around 90. If a recession is to be postponed,
the Leading Inflation Index would likely moderate as in 1989 and 1996,
if history is any indication.
Component indicators show the U.S. employment/population
ratio is .60% above the 1998 low and .40% below the April all-time
high. The nonfederal debt growth rate of 8.0% is falling fast and
moved lower for the fourth month in a row. Capacity utilization of
80.6% is almost 1.5% below the June high. Import price growth rates
are almost nil at 0.1% and well below April’s 1.7% high. Dun & Bradstreet’s
selling price survey peaked in March at historically low levels comparable
to January 1957 before an August recession, so we’re almost off the
map for comparison purposes. This survey is being terminated. NAPM’s
buying price survey bounced up to 61% from 56.6%. The 1969/70 recession
saw this survey move up 10% over three months in April to June of
1970. NAPM’s vendor performance of deliveries survey moved up to 52.7%
from 49.2% but remains at a comfortable level. Industrial material
prices move to even lower negative monthly growth rates but the petroleum
subindex remains high. The U.S. trade-weighted dollar moved 1.5 points
below the November high to 101.8.
Consumer prices six-month smoothed growth
rates are November 3.1%, October 3.3%, and September 3.5%, so we’re
back to the August rate.