US Posts First Negative Inflation Print Since Lehman On Gas Price Plunge

Tyler Durden's picture

As previewed earlier today, January CPI data was historic in that, 6 years after Lehman, the US just reported its first negative headline CPI print, with overall inflation, or rather deflation, in January coming at -0.1%, in line with expectations, and down from the 0.8% in December. On a monthly basis, CPI tumbled by 0.7% from December, driven almost entirely by collapsing energy prices. Excluding the Great financial crisis, one has to go back a few years to find the last time the US posted annual headline deflation.... all the way back to August 1955, or just about the time Marty McFly was trying not to dance with his mother.

 

Here is the culprit for the plunge: "The energy index fell 9.7 percent as the gasoline index fell 18.7 percent in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been  unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose."

Gasoline:

However it wasn't just energy deflation: "The food index was unchanged in January, with the food at home index falling for the first time since May 2013."

So much for the good news: the bad news is that away from crashing energy prices, Americans continued to pay more for all other goods and services, with Core CPI rising 0.2%, more than the 0.1% expected, and in line with the revised December data:

The index for all items less food and energy rose 0.2 percent in January. The shelter index rose 0.3 percent, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco.

Some more on the core data series:

The index for all items less food and energy increased 0.2 percent in January. The shelter index increased 0.3 percent, with the rent and owners' equivalent rent indexes both rising 0.2 percent and the index for lodging away from home rising 1.3 percent. The personal care index rose 0.6 percent in January, its largest increase since the inception of the index in 1999. The apparel index rose 0.3 percent, and the recreation index increased 0.2 percent. The index for medical care was unchanged in January, with the index for medical care services rising, but the medical care commodities index falling. Several indexes posted modest declines in January. The index for household furnishings and operations fell 0.2 percent, and the indexes for new vehicles and for used cars and trucks both fell 0.1 percent. The index for alcoholic beverages fell 0.3 percent, as did the index for airline fares. The tobacco index also declined, falling 0.2 percent after rising in December.

 

The index for all items less food and energy has risen 1.6 percent over the past 12 months, the same figure as for the 12 months ending December. The index for shelter has risen 2.9 percent over the span, and the indexes for medical care, for new vehicles, and for alcoholic beverages are among those that have also increased. Indexes that have declined over the past year include those for used cars and trucks, airline fares, household furnishings and operations, and apparel.

And back to the headline data: "The all items index declined 0.1 percent over the last 12 months, the first negative 12-month change since the period ending October 2009. The energy index fell 19.6 percent over the span, with the gasoline index down 35.4 percent. The food index rose 3.2 percent, and the index for all items less food and energy increased 1.6 percent"

The full breakdown by components:

The spin of course, is that with core CPI coming in stronger than expected, and the "transitory" commodity crash supposedly behind us, there is only inflation ahead, and as a result, the USD is surging as the manic, bipolar market now assumes that a June rate hike is, once again, inevitable.

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MATA HAIRY's picture

my density has pumped me to you...

 

but what about durable goods?

Dizzy Malscience's picture

I guess it is time to print more funny money that does not make it to main street.

It's worked for the class divide so far.

Zero_Head's picture
Zero_Head (not verified) GMadScientist Feb 26, 2015 12:50 PM

It IS going to be different this time

Pool Shark's picture

 

 

Yep, here comes that fed rate hike...

 

Yellen will announce it right after the next FOMC meeting...

 

You just wait...

 

The rate hike is on its way...

 

Higher rates will be here before you know it...

 

Better sell your bonds...

 

Hyper-inflation, here we come...

 

moneybots's picture

Kondrateiff Winter is the time of deflation.

Bernanke quadrupled the FED balance sheet and here we are with a deflation print, anyway.

 

100% of bubbles deflate.  It won't be different this time.

lexluthor19's picture

it's the Libyans! Run for it Marty! 

papaswamp's picture

Medical items and food running hot at +3% with housing close at 2.9%. Thus the big monthly costs are still running way above the 2% target of the Fed. Though auto prices have dropped, auto loan levels and length of loans are at record highs, meaning ultimately the vehicle costs way more than the sticker price that the CPI detects.

JRobby's picture

Amortize the cost of that car 84 months

Amortize the cost of that education 120 months

Amortize the cost of those uninsured medical & dental procedure 60 months

Oh? Still can't make the rent or buy enough food?

Huh? But I financialized most of my costs?

new game's picture

just like gov.org. bonding bitches

Handful of Dust's picture

coffee, dark choclate, cars, insurance, property taxes all up about 5% to 10% this year in this deflationary, globally warmed environment.

JRobby's picture

booze

bail bond spreads

lawyers

court costs

all up along with property taxes

 

glenlloyd's picture

Along with fuel for the plebes here in Iowa. Legislature rammed through a .10 / gallon fuel tax increase just a couple days ago.

This really has people pissed off as it won't solve the infrastructure issue it was said to help fix. Further, the committee it came out of in the Senate had to be jiggered around in order to get enough votes to get to the full Senate. Committee leader expelled two members who were voting no and replaced with a yes vote and another person to replace himself so he could vote yes.

Get rid of them all!!

moneybots's picture

"coffee, dark choclate, cars, insurance, property taxes all up about 5% to 10% this year in this deflationary, globally warmed environment."

 

People will miss the forest for the trees.

When a credit bubble collapses, people won't have money for chocolate, cars, etc.  

 

 

 

 

 

amadeus39's picture

Why are commodity prices so low compared to stocks. I haven't read what I would consider a good explanation.

 

clade7's picture

Where the fuck do these people shop?  To add insult, Prop taxes up too...

docinthehouse's picture

You are hilarious!!!!  MARTY MCFLY !!!!!!    Oh THAT was amazing!!! Sign up for SNL !!!

DavidC's picture

"...the manic, bipolar market now assumes that a June rate hike is, once again, inevitable".

I'll believe it when the S&P 'plunges' by more than 0.1 of a point...

DavidC

Being Free's picture

"... with the food at home index falling ..."

Indeed, Mrs Free and I switched from Iams to Friskies and saw the food at home bill decline.

tarsubil's picture

Try gourmet alpo. The best value for gourmet quality "food".

Mi Naem's picture

Yes, but is it certified non-GMO and Orgasmic? 

Gotta keep the Mrs. happy, even on a budget. 

thetruthhurts's picture

Cat food is better for you than dog food... Eat health man!

Zero_Head's picture
Zero_Head (not verified) thetruthhurts Feb 26, 2015 12:57 PM

+1 for the proper use of thAn!

GMadScientist's picture

There will be no rate hike in June, nor in September, nor in 2015 or even 2016.

Please stop pretending like the Fed has a choice in this matter; it's disingenuous and lame.

moneybots's picture

"There will be no rate hike in June, nor in September, nor in 2015 or even 2016."

 

The FED wasn't supposed to end QE for ever, yet it did.  It was in fact, forced to.

The FED keeps talking of raising interest rates, despite the slipping economic news and keeps painting a rosier picture than the economy is, to justify raising the rate, rather than talking of more easing to boost a sagging economy.

The FED might be forced to raise the rate, just as they were forced to end QE.

GMadScientist's picture

Please don't conflate what they say and what they do. Yellen knows full well any rate increase will crater this so-called economy.

Seasmoke's picture

It's all a Ponzi !

JRobby's picture

What the banksters know like a religion is that when times are great no one seems to mind the ponzi.

When times are bad everyone seems to mind the ponzi.

The ponzi will always end. The best they can come up with is to lie about it for 10 years until the collapse? (we are in year 7)

Seasmoke's picture

Price of food up 33%… Hide and don't pay for half the food. .... grocery bill goes down..... Deflation 

thetruthhurts's picture

I thought food and energy weren't counted....

Eagle Keeper's picture

Someone please explain the difference between negative inflation and deflation?  

XitSam's picture

Negative inflation is used by economists and other qualified elites. Don't worry your little mind about this, serf.

moneybots's picture

"Someone please explain the difference between negative inflation and deflation?"

Negative inflation means they can avoid using the term deflation, so as to not scare people.

 

Racer's picture

Not you as well ZH negative inflation

 

Negative implies bad, which "negative inflation" isn't... so call it by its real name, deflation and stop encouraging aiding and abetting the falsehood.

It is like altering global warming to climate change...

Propaganda!

Eagle Keeper's picture

No shit. Global warming,  er.a...  Climate change. 

But this time will be different.

Zero_Head's picture
Zero_Head (not verified) Eagle Keeper Feb 26, 2015 1:04 PM

ummmm, it's now called climate disruption although I am not quite sure WHO or WHAT is interupting the weather. Democraps are too stupid to know what warming, climate, global, or disruption mean.

tarsubil's picture

Peter Schiff disagrees with just inflation. Prices don't inflate, the money supply inflates. The only real inflation is in the money supply not prices. The reason lower prices are bad is because it signals a down turn in the credit cycle which may destroy our entire debt based financial system. Sooner or later, the drug of printing won't be enough and deflation will destroy it.

TheReplacement's picture

That all depends on if you see hot money or just high prices. 

Bankers and corps get inflated currency.

Plebes get inflated prices.

Not the same thing at all but certainly they happen in relation to each other.

TuPhat's picture

I like this deflation idea.  Too bad it isn't real.  Bought some hamburger patties last week at a good price.  Don't understand why the label lists vegetable protien as the  main ingredient.  I'm not allergic to soybeans so all is good.  A bag of frozen chicken breasts used to be a little over 8 bucks and they wouldn't all fit on the grill at once.  Now they are 12 bucks and there is plenty of room left on the grill.  I'm sure they must be higher quality and denser or something.  Deflation is coming to a store near you but don't expect it to see it in the prices.

Eagle Keeper's picture

Yeah, but the one thing that bugs the shit out of the system is the 'gallon'. They can't shrink a gallon of gas to hide rising prices. Problem with the rest of retail is there are no standard units of measure.

Zero_Head's picture
Zero_Head (not verified) TuPhat Feb 26, 2015 1:07 PM

Chicken is dirt cheap here. $1.68 lb for boneless/skinless

 

Beef is still high. It takes two years to raise beef though. 

orangegeek's picture

Deflation.

 

Depression.

 

 

KansasCrude's picture

 

Gas prices in my neck of the woods have increased from $1.69 to $2.20/gallon since late January.  That deflation number will be short lived. Watched a Max Kieser interview wit Pippa Malgram yesterday and she said she spoke recently with Paul Volker about the gubmints inflation number and he was not buying the 2.2% rate.  She asked well whose numbers do you think are best.  His reply was John Williams at Shadow Stats because he still calculated inflation like they did in the 80's.  Oh course John's numbers are 8-9% inflation....So a temporary drop in gas  prices is not all they want us to believe.  Been jacking with my Homeowner/Auto insurance rates with SAFECO my homeowners is now up 61% in 2 years (NO CLAIMS).  Trust me I don't save that much gas in three years.  Of course that doesn't even include my Health insurance increases. Looks like ZIRP has another cost if the Insurance ompanies can't make a return on all their cash then we get screwed with higher rates.....oh another thank you to the FED.

 

KUDOS to John Williams for keeping it REAL. 

sudzee's picture

Don't purchase today cause everything will be cheaper tomorrow. FED can't let this happen so they will deffinately strive for unrates to reduce the value of unmoney. Think i'm going to invest in ungold and unsilver.

nightwish's picture

Forget inflation for a second. THIS is what you guys should be pondering right now

http://mashable.com/2015/02/25/strange-lights-dwarf-planet-ceres/

sTls7's picture

It's called Photoshop.

sTls7's picture

Rate hike, I don't think so,

sTls7's picture

Thought enegy isn't counted?

Zymurguy's picture

yeah, I thought food and fuel wasn't a good enough component to use in these CPI calculations.