The recent trends in data are beginning to make the yield curve inversion that began last summer look pretty prescient in its historical implication; recession within a year is likely. The yield curve inversion reached a depth last seen in 1981, both the ISM manufacturing and ISM services indexes are now contracting (reading below 50), only 23 states are experiencing positive economic growth (explained in last ALCOTalk newsletter) and now, today, we see
disinflation is accelerating. The chart below shows that it pays to listen to those who actually control pricing, rather than the opinions of those who think they know about pricing. Small business have been warning about disinflation and continue to warn it will accelerate this year. According to this chart, a 3.5% CPI reading is not out of the question this year.
What does all this mean for you? As the next chart shows, you should be talking about/planning for a transition to a falling FF rate. I have been writing about this in the newsletter the last few issues and will talk more about it in the next issue. I will also be updating everyone at the 2023 ALMEdge Users Conference at the end of March. That's right! It's happening in person (with a new twist) this year so keep your eyes open for a "save the date" email from us soon.
