I am deeply confused by today GDP numbers. I was expecting that the masters of the universe will prepare GDP report to be a good excuse for today rate cut (or a good tool to pressure for a cut, because Feds do not participate in statistical exercises).

Why did they put the chain deflator at 0.8%??? To say that inflation is over and we can safely cut? But the games with decreasing chain deflator made GDP growth at 3.9% rate, definitely not a good number for a cut. It will be revised down and inflation revised up, later on.

The only possible answer I see is that the numbers were not cooked and we do have a chain deflator at 0.8%. If you look at the chart it’s scary (today number is not plotted yet):

The last time the chain deflator was at 1% it was in 1998 (green line), it never happened even during the deflationary scare of the last recession. We just fell off the cliff straight to the off-the-chart record, below LTCM and Asian Currency crisis deflation scare. The last time the chain deflator was below 1% it was in 1954, we’ve just made a 53-year record.

That means all the pricing power is quickly evaporating and while there is a lot of production in the pipeline the final consumption has to be showed in by the lower prices.

We got a flat tire while driving in the left line on the highway, at full speed. I think Feds must cut today but it won’t help