USA:DEFLACION AVANZA

U.S. CPI: Lowest since 1954 - deflation here we 

Posted January 16th, 2009 in Economy By Edward Harrison |

The United States Department of Labor released its monthly data on

inflation today at 8:30AM. The data showed that inflation rose only

0.1% over the last year, the lowest reading since 1954. I should note

that oil and food prices continue to fall. Combine this with slow

consumer demand which will feed through into consumer prices and you

have deflation by next month.

While we should welcome lower prices, we should be aware that they are

due entirely to falling demand and excess supply; that is a world of

difference to deflation from productivity gains. This is the

environment of depressions. The economy is looking more and more like

the 1930s every day.

Consumer prices fell by a slightly smaller-than-expected margin in

December, according to government data on Friday that showed a sagging

economy was exerting downward pressure on prices and raising the

specter of deflation.

The annual pace of price increases was the slowest in more than 50

years. The Labor Department said its closely watched Consumer Price

Index dropped 0.7 percent after falling 1.7 percent in November —

tumbling for a third straight month. Analysts polled by Reuters had

forecast headline CPI dropping 0.9 percent in December.

Core prices, which exclude food and energy items, were flat for

the second month in a row in December. That compared to analysts'

prediction for a 0.1 percent increase.

On a year-over-year basis, consumer prices rose 0.1 percent,

braking from a 1.1 percent increase the prior month. It was the

weakest reading since CPI fell 0.7 percent in December 1954.

Energy prices fell 8.3 percent in December, after declining 17

percent the prior month. Compared to the same period last year, energy

prices fell a record 21.3 percent.