My Two Cents

Here comes deflation

Chris Farrell Jan 16, 2009

More evidence that deflation lies in our future.

The Consumer Price Index out today decreased 1.0% in December. December’s level was 0.1% higher than December, 2007, according to the BLS. It’s the third consecutive monthly decline. Yes, falling energy prices account for much of the decline. But so does falling demand.

The CPI minus energy and food–the so-called core-CPI–was unchanged in December. The core-CPI is up a mere 1.8% for the past 12 months, and the increase for the year came in the early part of that time period. For the past 3 months the core CPI has been negative to zero.

A combination of a global recession and deflation is really worrisome.

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