ITR Economics Report – Disinflation and Deflation
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ITR Economics Report – Disinflation and Deflation

The table below shows that key pricing series have turned over to either disinflation or deflation. The rate of inflation is abating. The shift may not be occurring at the speed the Federal Reserve wants, but these are not normal times, given inflation is an echo effect from the government’s reaction to COVID and Russia’s invasion of Ukraine remains a supply/price disruptor.

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Note that the CPI for Food is not yet in disinflation, but the 1/12 rising trend is leveling and descent to lower numbers is ahead. Note also that key commodity prices are running below year-earlier levels. Along with an easing in the global supply chain stress, with the likely exception of goods coming out of Western Europe, the trends are saying that inflation is coming down. Our analysis suggests that the disinflation will continue, with the impact of the war being the biggest threat to that trend. Patience is needed on the part of the Fed – not further aggressive rate increases.The Fed has a history of going too far when pushing interest rates higher. “Too far” means both for longer than necessary – i.e., when the inflation cycle is already shifting (as it is today) – and too high, to the extent that the impact to the demand-driven aspect of inflation is so egregious that markets are disrupted and GDP and/or Industrial Production are negatively impacted. The threat of this result goes up if the Fed is trying to restore prices to pre-COVID or pre-Ukraine war levels.In our opinion, the Fed should cease its quixotic quest for a near-term return to the pre-COVID and pre-war inflation “normal.” Gradualism and patience are needed despite political pressures. Chairman Powell does not need to become the next Paul Volcker. Mr. Volcker is a great example of the Fed’s history. Imperfect people with honorable intentions. The more the Fed overshoots the mark, and the more the Fed looks for near-term responses in an economy that does not function with predictable monetary policy results, the more damage the Fed tends to inflict upon the economy in terms of jobs, income, and opportunity. Powell does not need to be the next Volcker.

Some Good News

1. US Real Personal Income (excluding transfer payments) in August was up 0.6% from one year ago, and the 12MMA set a record high. In general, real wages are rising faster than inflation. People are keeping their ability to spend money intact, which in turn keeps the economy in a growth profile.2. US Personal Consumption Expenditures, adjusted for inflation, were up 1.8% year-over-year for the latest month, and the 12MMA data trend is at a record high.3. Auto loan delinquency, at 3.86%, is at a five-year low.4. Residential delinquency, at 1.91%, is the lowest in over 15 years.5. Credit card delinquency is at 1.71%; the pre-COVID 10-year average was 2.80%.


We could focus on the stock market, rising interest rates, and future Fed actions and leave it at that. Perhaps, though, we could:• Look at the key positives in the economy, especially with wages and consumer spending both rising in inflation-adjusted terms.• Assess which of your company’s markets are interest rate sensitive, and which trend independent of changes in interest rates.• Focus on operating profit, because inflation erodes margin. You can use inflation at this stage of the cycle to improve your margins.• Remember that – unless you were a full participant in a “manic cycle” stemming from COVID (think of home exercise equipment, household furniture, patio furniture, etc.), where demand was essentially “pulled forward” from future years because of the social economic circumstances – there is consumer and industrial demand in the system. There are both needs that must be met and means to pay for them.



Greg Miller CEO, President, Corporate
Greg Miller is Chief Executive Officer and President of Henry S. Miller Companies, a family of companies that includes a full array of commercial real estate services. Greg has extensive working experience involving the acquisition, financing, development, leasing and disposition of millions of square feet of commercial real estate. As former President of Miller Realty Partners and HSM Equity Partners, Greg supervised the acquisition and structuring of commercial real estate transactions for the... Read More