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Consumer Prices Tumble Most In 6 Years, Core Inflation Misses
Great news! The cost of 'stuff' that Americans buy dropped 0.4% last month, or rahter great news for anyone but economists for whom this is the worst possible outcome imaginable - after all what will spur insolvent Americans, where the middle class no longer exists, to spend their money today if they don't think prices will rise tomorrow?
This 0.4% drop (slightly worst than expected) is the biggest monthly drop since Dec 2008. The drop is led by a 9.4% collapse MoM in gasoline prices. Ex Food and Energy, CPI rose 1.6% YoY (less than expected 1.7% rise) missing for the 2nd month in a row. The question is - will the Fed see this as 'transitory' (ignoring the EIA's call for low oil prices for longer) or use it as another excuse to re-uncork QE?
The biggest drop in 6 years.
The full breakdown shows prices broadly falling... with a total collapse in the prices for fuel and gasoline...
From the report:
Food
The food index rose 0.3 percent in December after a 0.2 percent increase in November. The index for food at home rose 0.3 percent with five of the six major grocery store food groups increasing. The index for dairy and related products posted the largest increase, rising 0.6 percent after declining in November.
The fruits and vegetables index rose 0.4 percent, with the fresh vegetables index rising 2.4 percent but the index for fresh fruits declining 1.3 percent. The index for meats, poultry, fish, and eggs increased 0.3 percent as the index for beef and veal continued to rise, advancing 0.7 percent. The index for other food at home increased 0.3 percent, and the cereals and bakery products index advanced 0.2 percent. The nonalcoholic beverages index, in contrast, declined in December, falling 0.4 percent after rising in each of the previous three months. The food at home index has risen 3.7 percent over the last 12 months, with all six groups rising over the span. The index for food away from home rose 0.3 percent in December after a 0.4 percent increase in November, and has risen 3.0 percent over the last year.
Energy
The energy index continued to decline, falling 4.7 percent in December after a 3.8 percent decrease in November. This was its sixth decline in a row, and the index has fallen 13.3 percent over the six month span. The gasoline index fell 9.4 percent in December and has declined 22.4 percent since June. (Before seasonal adjustment, gasoline prices fell 11.1 percent in December.) The fuel oil index also continued to decline, falling 7.8 percent, its largest decline since June 2012. However, the index for natural gas turned up in December, rising 1.5 percent after falling in October and November. The electricity index also increased in December, rising 0.8 percent.
All items less food and energy
The index for all items less food and energy was unchanged in December. The shelter index increased, advancing 0.2 percent, with the indexes for rent, owners' equivalent rent, and lodging away from home all rising 0.2 percent. The medical care index rose 0.5 percent in December. The index for prescription drugs rose 0.9 percent, and the hospital services index increased 0.5 percent. The tobacco index advanced in December, increasing 0.8 percent, and the personal care index rose 0.1 percent. A wide array of declines offset these increases. The apparel index fell 1.2 percent in December following a 1.1 percent decline the prior month. The index for airline fares, which rose in October and November, fell sharply in December, declining 5.0 percent. The index for used cars and trucks fell 1.2 percent, the same decline as last month. The index for household furnishings and operations fell 0.3 percent, as did the alcoholic beverages index. The index for new vehicles declined 0.1 percent, the same decrease as in November.
The reson why the USDJPY soared on the report is that this is great news for all those liquidity addicts, and broadly commentators who think the Fed now (and really always) has no choice but to resume QE4.
So once again, let's hear it for Joyflation.
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Qe4eva
OOOPS!!!!
http://www.forexfactory.com/#graph=57894
"You best start believin' in deflation; you're in it!"
Never trusted the CPI, but huge lol that their cooked number is now screwing them hard. Will they change course or simply change how CPI is calculated again?
as usual simply change how CPI is calculated
change the rules as you go along to give keep the illusion alive
Clearly those cats haven't visited a Walmart lately.
Let the massive crushing deflationary reset begin!
Agreed! There's no reason why the price beef, chicken, fish, and toilet paper can't fall 50%.
the 60 inch HD 1080p TV I bought at Costco for $2,500 2.5 years ago is now available for $900.
Dats sum deflation - but oh wait, they adjust for that in the CPI formula.
Oh never mind. Ah, a squirrel / shiney penny
perhaps for the fed... the 5th time will be a charm?
Yep.
Here comes that fed rate hike...
Any time now...
Just around the corner...
You can bank on it...
You'll see...
Don't move.....or the dummy gets it.
Ten year at 1.72%. and 30 year at 2.36%. Yep, that rate hike is just around the corner....lol...
Inverted yield curve coming. 2-10T spread is about 130 bps now while the 10-30yr is about 70 bps. we could see sub 50 on both within 2015.
Yup, that why rates keep going down everyday.
Hey, Yellen is going to raise rates very soon. Oh and I fucked Bar Refaeli last night.
Did she make you perform jewish foreplay? Two hours of begging and pleading.
deflation is the best. but it won't last long as the ECB gets ready to flood the place with euros.
Where's Bonnie and Clyde ? Won't be the 30's this time, but they will take the gold again and savings will be converted to Bank stock shares, if they go Dodd Frank.
I am betting round 4/5 (depending on how you count it) will be pumping out $100 Billion per month. Most of it going into corporate bonds, Freddie and Fannie, and then wallpapering over whatever shit the gub'ment cannot sell. Maybe $120. I cannot see how much higher it could go, unless a big bank goes boom, and then it'll create a trillion or two out of thin air.
The Cork...............never been put back in............not all the way
All your money won't another minute buy.
dust in the wind, all we are is dust in the wind...
O.4%? Statistical noise or another lie.
Fed still buying, it did not end. Just is not overt.
Qe4eva
Moarrrr!!
Moron central bankers do not realize they are the problem
Re- Re- Re uncork QE. For sure.
Let me see....prices are falling because there is no demand.
So why aren't all these producers reducing their production? Because they do not have to. The Fed has kept them all awash in liquid cash. They can keep producing at these levels for years and still have some cash on the books for the bonuses.
Mal-Investment at it's best.
If the cost of money was 4%, I would wager my last wooden nickel that production would be closer to demand.
The good old days had businesses looking at the cost of funds and the return on investment before production and expansion.
I bet half the project managers today do not even have that skill.
Wait until you hear all of the new spending programs coming out of the Presidents mouth...could be trillions..
youngman
"Wait until you hear all of the new spending programs coming out of the Presidents mouth...could be trillions.."
I think it comes out of a differant orifice
"But Hole" will surffice
You do know we owe debt to somebody, now if they call in those margins on the quick, their will be more than words comming out the presidents mouth.
IRS may have to conduct temporary shutdowns, report says
http://www.marketwatch.com/story/irs-may-have-to-conduct-temporary-shutd...
we are coming unglued folks....
'The only thing worse than inflation is talking about it': looks like this applies to deflation as well.
The string is now frayed from all the pushing.
Moar print! Peak Krugman!
I think the core reading is crap. Housing, utllities, medical and food have all risen a solid 3% Y/Y unadjusted. This is why the drop in gasoline ( uses only 4-6% of income vs +60% for the items I listed) is pure crap. People can maybe afford a bit more food. Including used vehicle purchases is hilarious... I dont buy a used vehicle every month. What America has done is bought new vehicles and taken on huge debt load...why that isnt included is hilarious.
Let's raise them rates!
Isn't it natural for the price of everything to drop when the cost of shipping everything is dropping due to low gas prices?
The sociopath despots are talking about a large gas tax at the fed level. My state is floating the same idea.
That'll fix everything. The 110 TRILLION spent by fed/state/local over the past 30 years wasn't enough to address all the non-problems they created. Just extort a few trillion MOAR.
Can't wait for utopia to set in...
That Utopia only comes in two sizes: 9mm and 40 to the head.
The hilarity never ends among the Inflationistas on ZH. Falling prices PROVE that prices are up! The Fed is just hiding it better! Just how hard is it to summon up the courage to admit that one has been mistaken? Come out of the bunker and blink at the sun. It won't kill you.
"[A]fter all what will spur insolvent Americans... to spend their money today if they don't think prices will rise tomorrow?" I'm not too sure this well-worn economic bromide really captures Americans' childish "I want it now" buying habits.
I'm in the market for a gently used ram 2500 diesel 4x4 - I'm looking forward to all those laid-off tekus oil patch boyz having to sell their blinged out 2500s for grocery money soon. Now THAT's deflation I can love, bitchezz !!!
My rent is the same. This makes me a very little less poorer.
This time the Fed does QE 4 bigger. They'll do $170 billion/month.
It's hundreds of billions/per month of printing to counter deflation.
Can't have lower asset prices. Make the 99% poorer.
People always fail to distinguish between the types of deflation, it seems. Easier to simplify than to accept nuance.
Deflation due to rises in productivity should be welcomed--it's what keeps the market for consumer electronics alive, for instance.
But deflation due to slowing economic activity and/or excessive levels of debt being paid down should be scorned at all turns. That's what Europe and the US faces, though the latter is doing much better than the former.
And as much as I love cheaper oil, it's definitely a bad thing that the Saudis can engineer deflation in one of the largest commodity markets in the world all by themselves just by flooding the market. Hope it bites them in the ass--long live the fracking boom...