By Jeff Cox, CNBC.com Senior Writer NEW YORK ( CNBC) -- The decline of milk prices this year has been a welcome development for consumers pressured by $4 a gallon gas, but could be a bad sign for the economy. Falling milk prices--particularly over the past decade--have been a warning signal for a slowdown, while rising prices have accompanied upturns in the economy, according to research from Nicholas Colas, chief market strategist at ConvergEx in New York. "That's good news for this high-profile consumer good and its effect on inflationary expectations," Colas said. "At the same time, milk prices have been cyclical since the Great Depression. The pullback in 2012 could therefore be a useful early warning sign about a slowing U.S., and global, recovery." Prices pulled back during the recessions of 2002-03 and 2009, while they surged in 2001, 2004, 2007 and 2011.
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One area of which investors should take note: Colas found that demand for organic milk actually has increased 22%, translating to higher prices and perhaps indicative of a two-speed recovery where higher-end goods are trending stronger than their lower-cost alternatives. "Not only are milk prices a useful economic indicator...and a proxy for inflationary expectations... but also a great barometer between a commodity and a differentiated good," Colas said. "Different, in this case, is very good." --Written by Jeff Cox at CNBC