US Inflation???

Over the last year, import prices for goods coming into the USA are down 8.2%. Prices for goods exported from the USA are down 6.5%. The drop in import prices has not been this severe since just before the Great Recession in 2008.  The drop in export prices is a record....these prices have not dropped this much since records were first kept in 1989. This is not all the fault of oil. Prices for finished goods and consumer goods are also lower.

This all suggests that the USA will soon see a serious bout of deflation - the type of thing you see in economic depressions. It suggests that a new recession is imminent, if it hasn't already begun. If true, this will hopefully last only the first three months of the year, which is what happened in 2014 and 2015.

The US Fed will raise interest rates again. They will be raising them when we are starting to see very significant deflationary pressures in the USA. Having badly mismanaged monetary policy since the Great Recession, they are out of options. Raising rates now will only make this worse.

Yes, this is all glum. A more positive post will follow focussing on US jobs growth, and personal debt levels, which are both good news stories. But I'm not getting back into the equities and bond markets again any time soon.