Why is inflation considered good?

Inflation can also be considered "good" as an economic
indicator, although in some circumstances it is a bad economic indicator as well.  But
some inflation means that the economy is healthy, that demand for goods and services is
steady and that manufacturing sectors are humming along to keep their shelves stocked,
and place orders to factories for those goods.  All of these are positive things for an
economy.

There is a threshold, however, when inflation
becomes harmful to an economy, and takes away from real income and therefore consumer
spending.  This is why the Federal Reserve closely controls interest rates, so that
inflation can be kept at a reasonable and manageable level.