Higher Prices Ahead?

Chart of the Week for March 11-17, 2005

The Economic Cycle Research Institute’s (ECRI) Future Inflation Gauge index is designed to anticipate future changes in the inflation rate. A sharp, upward swing in the index can indicate an increase in future inflation and vice versa. The index finds the weighted average of eight key indicators that provide clues about inflationary pressures in the economy. Currently, the index reports that the likely future direction of inflation is higher because the index measure is above the average of the 20–year period shown in this chart. Recent consumer focus on higher gas prices and stronger economic indicators has almost hidden the fact that prices on some finished goods have been increasing. ECRI’s inflation gauge may be suggesting that higher prices are yet to come.

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