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.
[5]
The full breakdown shows prices broadly falling... with a total collapse in the prices for fuel and gasoline...
[6]
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.
