Are You Gonna Go My Way

JACKSON HOLE, Wyo. -- A below-trend 0.1%

increase in the core (excluding food and energy)

consumer price index

pushed its year-on-year growth to 2.1% in June from 2.0% (slowest since 1966) in May.

Just one month removed from the kindest pace of core consumer price increase in 33 years, then, it can hardly be said with certainty that this measure of inflation has bottomed. (See our economic indicators

page for a chart.)

So if

FOMC

members are indeed waiting to see eye-whites before they pull the policy trigger -- before they make less accommodative the kind of financial environment in which the money measures and bank lending are growing as much as 3 percentage points faster than nominal

gross domestic product

-- then they surely still have their firearms tucked safely in their holsters.

Is that what they're waiting for?

Who the hell knows anymore?

American Woman

The bean counters at

Census

reported this morning that aggregate

business sales

(the sum of sales at the manufacturing, wholesale and retail levels) rose 1.2% in May. Aggregate business inventories rose 0.3%.

Sales growth has exceeded inventory growth by a bigger and bigger margin during each of the past six months. The spread between the two has thickened from 0.3 percentage point in November to 3.4 percentage points (its widest since March 1997) as of May. (Again, see our data

page for a chart.)

Yawning gaps like that almost always point to production increases -- the most recent one was born early in 1996 and led to an acceleration in

industrial production

to roughly 6% from roughly 3% over the next four quarters -- and so it bodes well for output through at least year-end.

The factory sector had already been laboring under the weight of the Asian crisis by the time last autumn rolled around -- remember, it had chopped 221K jobs between April and July, and industrial production had slowed markedly between the last half of 1997 and the first half of 1998 -- and then the Russia-

LTCM

thing had manufacturers convinced that a prolonged period of materially slower sales was setting in.

It was not to be. Sales growth barely stumbled; it troughed in September and then went on to accelerate to a 6.3% year-on-year pace (its fastest since February 1997) over the next eight months.

That drove the

inventory-to-sales

ratio to the all-time low at which it currently sits. And, now that the (sales) future's so bright you gotta wear shades (even the dumbest forecasters, now that the year is more than half over, have accepted that the economy will grow about as fast this year as it did last), and especially because we're heading into the crucial Stock-Your-New-Millennium-Shelter shopping season, it stands to reason that manufacturers will ramp production and fatten inventories a bit.

That's what the

NAPM

numbers have been hinting at for a while now.

And if you don't believe them, then listen to

Abby

.

She knows what's what with the economy.

She's been calling that slowdown crap bunk all along.

Side Dish

Just how beaten is a bond market than can't even rise for an eight-count on the second-kindest one-two price-index punch of the cycle?

Uuuuug-lee.

And yes. I know he doesn't spell it that way.

Worst Riviera?

Buick.

Italian.

French.

Geraldo.

Mexican.