If it looks like a duck, swims like a duck, and quacks like a duck, then it probably…

More inflation? Less Growth? Then it probably is stagflation…

At least this is the data we got yesterday: hot PPI inflation and cold Retail Sales spending.

As a result, yesterday the yields of 10-year treasury bonds increased significantly, but at the same time the forecast of GDP growth in Q1 2024 decreased meaningfully - see Figure 1. This relationship suggests declines in yields, not increases - but yesterday inflation clearly prevailed...

Figure 2 shows a second version of the same chart.

Table 1 details the change in GDP forecast according to the Atlanta tracker model. The model update on March 14 got only two data: Producer Price Index & Retail Trade.

Interestingly, in the current inflationary environment, consumers spend more on services (PCE Services - Figure 3) and less on PCE Goods. The PCE Goods growth forecast after yesterday's data is currently negative (Figure 4, see blue arrows).

Figure 5 shows the change in PCE spending versus the 10-year Treasury bond yield.