ACHUTHAN: 'The Explanation Is Simple: Recession Kills Inflation'

Sam Ro | May 31, 2013, 1:20 PM | 2,004 | Lakshman Achuthan, the head of the Economic Cycle Research Institute (ECRI), continues to be convinced that the U.S. went into a recession in mid-2012.

He writes his latest commentary in the wake of today's disappointing personal income and spending report.

"Despite surging prices for homes and equities, consumer spending is contracting," writes Achuthan.  "Quite simply, the wealth effect is rendered moot by languishing incomes.

"No wonder yoy U.S. imports growth has also plunged into negative territory. In the past, this has happened only during U.S. recessions."

He also thinks all this explains why inflation measures continue to come in lower than expected.

"Some are surprised that inflation has failed to take off despite massive amounts of quantitative easing," he writes.  "The explanation is simple: recession kills inflation."

Read it at BusinessCycle.com.

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