Billmon: Down Time

Yesterday's bit of bad economic news was the first quarter GDP report, which showed the weakness in retail spending and durable goods orders is evolving into a classic inventory-led slowdown -- even if it hasn't yet curtailed the energy-led upturn in consumer inflation.

A whiff of stagflation, in other words -- just as Paul Krugman predicted. While growth slowed to an annualized 3.1% (and will probably be pushed even lower in subsequent revisions) the so-called core personal consumption expenditure (PCE) price index rose at a 2.2% rate, the highest level since the last quarter of 2001.