"Reflation" Is Officially Dead: Core CPI Tumbles For The First Time In Over Seven Years

Tyler Durden's picture

The reflation trade is officially over.

At the same time that retail sales posted the worst 2 month drop in 2 years, CPI - the bedrock behind the Fed's rate hiking intentions - just hit a brick wall, and after months of headline CPI growth mostly the back of the energy "base effect", in March this ended with a thud, when headline CPI printed at -0.3%, badly missing expectations of an unchanged print. The number was so bad, all 79 economist estimates missed the number (predicting a -0.2% low).

The biggest driver for the headline plunge was energy, which declined 3.2%, with the gasoline index falling 6.2%, and other major energy component indexes decreasing as well. The food index rose 0.3 percent, with the index for food at home increasing 0.5% its largest increase since May 2014.

But the real story was in the core numer, because CPI ex-food and energy dropped -0.1%, another huge miss to the +0.2% rise expected, and also the first - and worst - decline since January 2010.

Among the core components, the shelter index rose 0.1 percent, and the indexes for motor vehicle insurance, medical care, tobacco, airline fares, and alcoholic beverages also increased in March. These increases were offset by declines in several indexes, including those for wireless telephone services, used cars and trucks, new vehicles, and apparel.

More details from the report that will likely assure that Yellen will not be hiking rates for a long time:

The index for all items less food and energy declined 0.1 percent in March. The index for communication fell 3.5 percent as the index for wireless telephone services decreased 7.0 percent, the largest 1-month decline in the history of the index. The index for used cars and trucks continued to fall, declining 0.9 percent in March, and the new vehicles index decreased 0.3 percent. The apparel index declined 0.7 percent in March after rising 0.6 percent in February.


The shelter index rose 0.1 percent in March, its smallest increase since June 2014. The rent index rose 0.3 percent and the index for owners' equivalent rent advanced 0.2 percent, but the index for lodging away from home fell 2.4 percent. The medical care index increased 0.1 percent in March, as the index for hospital services rose 0.4 percent, the index for prescription drugs was unchanged, and the physicians' services index declined 0.3 percent.


The index for motor vehicle insurance continued to rise, increasing 1.2 percent in March. The index for tobacco rose 0.5 percent, the airline fares index increased 0.4 percent, and the index for alcoholic beverages rose 0.2 percent. The indexes for recreation, for education, and for household furnishings and operations were unchanged in March.

Even Shelter inflation is now rolling over:

Incidentally, just moments after Trump's flip-flop on the USD and on rates, now looking for lower rates instead of higher under advice of his ex-Goldman counsel, it became clear that the US economic data would have to decline sharply in the coming months to grant his wish, and to stop the Fed from hiking further, which is why we said the following:

And sure enough...

Now we look forward for Wall Street to "U-turn" alongside Trump, and explain how it was only kidding about rising rates being good for risk assets, and what it really meant was that only QE4 can fix the economy, as usual.

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WinstonSmith1984's picture

FlipFlop Donnie will save us all

VinceFostersGhost's picture



Whatever you do......don't use the deflation word.




GUS100CORRINA's picture

Topic: "Reflation" Is Officially Dead: Core CPI Tumbles For The First Time In Over Seven Years

My Response: Nothing said in this article surprises me. For the last 8 years. OBAMA has lied using FAKE data from FAKE earnings created by FAKE leaders. Figures LIE and LIARS can figure. O'foolish Galatians, who has bewitched you?

Below is the REAL DATA from a TRUSTED SOURCE (SHADOWSTATS.COM). The data points are screaming RECESSION for those with eyes to see and ears to hear.This has been going on since 2016 ... one year before President TRUMP took office.


No. 879: March Employment and Unemployment, Help-Wanted Advertising, Money Supply M3

April 7th, 2017

• FOMC-Rattling ‘Substantially Adverse Economic Circumstances’ Loom

• March 2017 Real-World Employment Prospects Continued to Plunge at an Annual Pace of Decline Not Seen Since the Depths of the Economic Collapse

• Soft Payroll Jobs Gain of 98,000 in March Was Not Statistically Significant

• Declining Monthly Unemployment Rates Simply Were Not Comparable

• That Said, March Unemployment: U.3 Declined to 4.5% from 4.7%, U.6 Fell to 8.9% from 9.2% and ShadowStats-Alternate Fell to 22.5% from 22.7%

• Those Were the Lowest, Headline Unemployment Rates for U.3 since May 2007, for U.6 since December 2008 and for ShadowStats since April 2012

• Nominal Money Supply M3 Annual Growth Sank to a 57-Month Low in March, Real Growth Declined to a Level Not Seen Since Depths of the Economic Collapse


No. 878: February Trade Deficit, Construction Spending, Updated Consumer Liquidity

April 4th, 2017

• Sharp Narrowing in February 2017 Trade Deficit Reflected Plunging Imports of Consumer Goods, Such as Autos and Cell Phones

• Declining Consumer Demand and/or a One-Time Reporting Aberration?

• First-Quarter 2017 Real Merchandise-Trade Is on Track for Worst Deficit Since Third-Quarter 2007

• Despite a Nominal 0.8% Monthly Gain in February Construction Spending, Inflation-Adjusted Activity Remained in Stagnant Non-Recovery, Headed for First-Quarter 2017 Quarterly and Annual Contractions

• Consumers Face Continuing Income and Credit Stresses, Amidst Mixed Optimism


No. 877: Industrial Production Benchmark Revision

April 2nd, 2017

• Industrial Production Just Took a Hit with Its Benchmark Revisions, Given Higher-Quality, Weaker Historical Data from 2015

• Double-Dip Recession in Production Now Steeper than Previously Indicated

• Two or More Consecutive Quarters of Annual Decline in Production Are Unprecedented Outside of Formally-Recognized Recessions; There Were Five, Now There Are Seven Consecutive Quarters in Place

• Gold and Silver Mining Activity Revised Sharply Higher

• Negative Indications for Pending Benchmark Revisions to Retail Sales, Durable Goods Orders and the GDP

• Broad Outlook Continues for Non-Recovering Economic Activity

• Issues Foreshadow FOMC Problems, a Weaker Dollar and Stronger Gold

Chipped ham's picture

Make America _________ again.

Fill in the blank


BennyBoy's picture


As long as bankers are making money, delay, delay, delay the inevitable bust.

QE4, 5, 6.....

Unless Granny straps on a dong.

onewayticket2's picture

i dont know.   the establishment wants trump to fail in spectacular fashion....as a warning to anyone else who might want to upset their club membership.


what better time take away the punchbowl....?

Fed-up with being Sick and Tired's picture

I dunno.  What in the past week of Trump reversals on EVERYTHING Promised makes you think that he has done anything but fight the establishment narrative:



2.   He is talking KEEP GRANDMA (YELLEN). CHECK.

3.   He is backing off of all of the other shit about Russia being OUR FRIENDS (maybe??).  CHECK.

Helix6's picture

Callahan: You know, you're crazy if you think you've heard the last of this guy. He's gonna kill again.

District Attorney: How do you know?

Callahan: 'Cause he likes it.

-- "Dirty Harry", 1971

flaminratzazz's picture

Deflation = PMs tank?

wisehiney's picture

PMs may tank with the paper collateral calls or the coming response to deflation may be anticipated early.

Either way my precious will fly when the fed stomps the accelerator all the way to the floor.

I have a souped up dump truck ready to beat you guys to the PM store if there is a big sell off.

Sonny Brakes's picture

Your PM may fly when the fed stomps on the accelerator but you'll still be accessed in a fiat currency and taxes will still be due in fiat currency.

robertocarlos's picture

When it all goes down nobody is paying any fucking taxes ever again. I'd slice the head offf any politicians and lawyers left.

Tugg McFancy's picture

I betcha Krugman is now thinking about that MOAB and its potential for economic stimulus.

onewayticket2's picture

that's a mighty big hole.   but wait, it didnt take any "workers" to dig it.  only to fill it.  so, it's only 50% effiecient at "stimulating" the economy.  That said, it reduced the workforce by 36, so wages will "necessarily increase".



Byte Me's picture

But, but, but Jimmy Daemon sez everythin' is frakkin awesome for da consumer.

orangegeek's picture

no demand for anything out there except overpriced housing paid for in cash by imported chi-coms


yellen and nigga did a bang up job over the last 8 years

ejmoosa's picture

If you were holding all those dollars, you'd be smart to send couples to America and buy up real estate.  And that is what they are doing, too.

Who wants to hold all those dollars as they sink in value?

Sonny Brakes's picture

Just wait until Chin decides to buy up large swaths of strategic infrastructure and parts of the military industrial complex. Trust me, they'll get it if the moneychangers get their way.

Boris Badenov's picture

Gasoline is up 20 cents in FL in the last 3 weeks.

Sonny Brakes's picture

When the price of gas goes up I simply drive less. The first place I stop driving to is the department store.

robertocarlos's picture

New Korean SUV can go from LA to NY on 4 and a bit tanks of gas. Better destroy Korea before they over-take GM and Ford.

NoWayJose's picture

Gee - any coincidence that the fake data is weak enough to maybe put the Fed on hold?

perkunas's picture

BS rent is doubling in my area, food prices out of control, housing prices to the moon, gas prices are up 40 percent, taxes up. Yet they keep pushing the deflation thing

Umh's picture

Then move to almost anywhere else.

bshirley1968's picture

It's based on credit inflation or deflation.  Not prices of the things you buy.

AND......So much of our "economy" is not based on the necessities we buy every week.  If our economy was based on necessities, GDP would be around $2 trillion.

Trade Maiden's picture

Forex Kong killed this trade having been short for weeks now.

He's now aggressively buying Canadian Pot Stocks, and has an email list for trade alerts.


katchum's picture

Great, everything will be cheaper for us to buy.

kenny500c's picture

Yeah, it is awesome. My rent, health insurance, car insurance, food, gasoline, electricity, all going down, down, down, LOL.

Games Without Frontiers's picture

The American economy is a used car with sawdust in the transmission case.

Red Raspberry's picture

They're a workin on getting the gas price back up.

robertocarlos's picture

There's no inflation. Sorry gold bugs. You'd have to drop a nuke somewhere for there to be any inflation and that would be hyper-inflation.

ElTerco's picture

Looks like a big recession just steamed into port.

Codwell's picture

We're in the same demographic fueled deflationary trap that Japan has been in for decades.

The only solution is to bring in 100 to 150 million immigrants. Japan refuses to bring in immigrants. The US will bring them in.  There is no choice.

For all you baby boomers who refused to have at least 3 kids, and the millions of abortions, this economy is the result.

But it's not just the US and Japan. Low birth rates are doing the same to Europe. And all our accumulated wealth won't change the problem or the solution. 

20 years from now you won't recognize the US. 

chosen's picture

Headline of CPI falling .3 percent is seasonally adjusted.  Unadjusted CPI was up .1 percent.