The Bacon Cheeseburger Index Offers This Clue About Deflation

For those who enjoy fast food, the thought of a hot, freshly cooked bacon cheeseburger is enough to get mouths to watering.

But the bacon cheeseburger has another purpose beyond satisfying hunger. Its price can serve as a non-traditional economic gauge.

And, right now, the Bacon Cheeseburger Index is pointing to deflation.

Here's an excerpt from a Sept. 30 CNBC article:

In case there's any doubt that food prices are falling, the Bacon Cheeseburger Index is offering confirmation.

The move in prices for the venerable gastronomic delight is a glaring indicator that while inflation gets all the headlines, deflation is important, too. The BCI has been trending down for quite a while now, and that's not necessarily a good thing.

The BCI is part of a band of "off-the-grid-indicators" that [the] chief market strategist at Convergex uses to take the economy's temperature. Where once the indicator pointed to rising prices that hit consumers in the supermarket and restaurants, it now shows things heading in the other direction.

The index peaked in December 2014, then broke a 12-month decline in May, but has been slumping ever since. The August reading, the latest available, reflects a 3.2 percent decline from a year ago.

In fact, the chief market strategist said such patterns show "a pattern reminiscent of past recessions," though traditional indicators are not pointing in that direction.

"Sometimes the official data is fine, but we think it never hurts to triangulate against other signposts we see on the road," the strategist said in a note Sept. 30. "(Conventional) wisdom is sometimes wrong, after all."

You can read the entire article by following the link below:

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