April 2014 Index

May 29, 2014

Is Rising Inflation the Next Inflector?

As we have discussed over the years, through our Guild Basic Needs IndexTM (GBNI), we are watching for inflation trends beyond the officially reported numbers. As we have said often, inflation may well be the inflector that signals tactical caution for us. We regard the prices of basic essential needs as tracked in our GBNI as a potential leading indicator of inflation before it appears in the headline CPI numbers.

We notice that GBNI has crossed the 100 percent threshold, meaning that the basket of food, clothing, shelter, and energy components in our index have doubled in price since January 2000. Meanwhile, over the same period the government’s Consumer Price Index (CPI) is up just a little over 40 percent.

Inflation data has been running at relatively low levels in the developed economies these past few years. Could this be about to change? Central bankers in the U.S., Europe, Japan, and elsewhere hope so as they have been trying to “get the inflation numbers up.” Perhaps their efforts are working. The recent acceleration in our GBNI which tracks the prices of basic, essential needs is something investors should follow.