Market Commentary

Inflation

Possibility of inflation.

Last Friday the PPI number jumped to 1%. Inflation at the producer level rose over twice expected at the same time the economy is starting to gain traction. Yesterday the CPI (Consumer Price Index) rose to .6% from .4% last month. This is the fourth month in a row of increases and a 30-month high.

Inflation was expected to rise by most pundits. It is basically a financial phenomenon. The dollar since January rose and topped two weeks ago when it began to fall. As the dollar weakens inflation rises. It is still above its low but after weakening for two weeks in a row, day after day, we may be seeing a new trend downward. That will stabilize and support higher precious metal and commodity prices. Also with a falling dollar, the CPI and PPI numbers should continue to rise.

More money in the system from government spending certainly can only support an inflationary cycle that appears to be just starting.