Rare Territory: Consumer Prices On the Decline

Mish

The CPI declined 0.4% month-over-month in March, with gasoline and energy leading the way.

The BLS CPI report shows an event that is quote infrequent. A negative Core CPI.

  • The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4 percent in March on a seasonally adjusted basis, the largest monthly decline since January 2015.
  • The index for all items less food and energy fell 0.1 percent in March, its first monthly decline since January 2010.
  • The energy index fell 5.8 percent as the gasoline index decreased 10.5 percent. The food index rose in March, increasing 0.3 percent as the food at home index rose 0.5 percent.
  • The indexes for airline fares, lodging away from home, and apparel, the index for new vehicles declined in March.
  • The index for shelter was unchanged, with increases in the indexes for rent and for owners’ equivalent rent offsetting the decline in the index for lodging away from home.
  • Indexes that increased in March include medical care, used cars and trucks, motor vehicle insurance, and education.
  • The index for all items less food and energy rose 2.1 percent over the last 12 months. The food index rose 1.9 percent over the last 12 months, while the energy index declined 5.7 percent.

CPI Month-Over-Month and Year-Over-Year

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April rates to be very interesting.

I expect big declines in many categories.

Consumers welcome these lower prices. The fools at the Fed don't, which is why we have huge bubbles that just burst.

Mike "Mish" Shedlock

Comments (37)
No. 1-12
Bam_Man
Bam_Man

My wife bought beef tenderloin (aka filet mignon) today for $7.99 a pound.
That is a price not seen since the 1990's.
Draw your own conclusions.

Bam_Man
Bam_Man

Our local Winn-Dixie supermarket.
Most people here are of modest means and that is a "luxury" item that they can not even consider buying.

Tony_CA
Tony_CA

Mish, I appreciate your summary of Economic indicators, but at this point- way. We now effectively living in a police state. The initial justification for this has proofed to be utterly wrong. It my county alone, 8 people died out of 1.2 million people. All the deaths are related to outbreaks at nursing homes not in the general community. One of the deaths was an individual actually listed was in hospice. Regards,

Carl_R
Carl_R

These are odd times, and odd things may happen. I expect deflation for a bit, followed by sudden inflation. Thanks to the covid relief bill, massive dollars will be flowing the consumers, either in pay, or unemployement benefits. For now, they aren't spending because they have to stay home, so prices will fall. Yet, for now they are doing something unusual - saving.

Once restrictions loosen up, they will want to go spend all that cash they aren't used to having, but, since production has been dramatically reduced, there will be a shortage of goods. Too much money chasing too few goods is usually a recipe for inflation. So, we could see deflation for awhile, then a sudden, sharp flip to inflation.

PecuniaNonOlet
PecuniaNonOlet

Pricing and price discovery is going to be a challenge with demand collapsing to never before seen levels. How do you price a gallon of gas when no one wants it? What about big screen TV? Computers? iPhones? With 20 million unemployed by end of April and growing and a may crash tomorrow stock market, how do you estimate consumer spending? As of today, i have a high paying job working from home and I have no intention of making any major purchases for the next 12 months. No european vacations, no remodeling kitchen, no new car, no new nothing. I am only buying food and paying utilities. And since i am working from home i am not even buying clothes and not using dry cleaner at all. There should be major price deflation but companies are reacting accordingly so I am not so sure.

compsult
compsult

That deflation is coming from the massive money and demand destruction seems obvious. What is not as obvious is how this plays out over the next year or two, with the money printing orgy. George Gammon makes the most cogent case for inflation that I have seen (in this video):

jivefive99
jivefive99

I think the only prices the BLS ever cares about when it comes to inflation calcs are gasoline pump prices. They are ubiquitous (everywhere), very public, easy to collect, believable and, unlike many parts of the economy these days ... REAL. I dont think they take seriously any other prices they collect or manufacture.

Carl_R
Carl_R

I wandered in yesterday to a local warehouse that sells high performance gaming gear nationally through their own website and through Amazon. The head guy was about the only one there since everyone was working from home. He said I couldn't buy in person, but we had a nice chat. I told him I guessed their sales were through the roof, and he said that they have so many orders right now that they can't keep up. Worse, they can't get new computers. The new 2020 models have been announced, but aren't being shipped yet due to production and supply issues. He's worried about what he will sell when his stock is gone.

Tony Bennett
Tony Bennett

"I expect big declines in many categories."

...

DEFLATION on tap.

Job cuts / hours cut / pay cuts are / will rule.

Watching ESPN the other night and bottom scroll had Big 12 Conference administrators taking 10% salary cut. This will play out everywhere in the coming months (especially after realization that economy will not bounce back as soon as DJT / governors "open up" economy).

Those calling for hyperinflation DEAD WRONG.

lol
lol

US is completely insolvent,trillion dollar monthly deficits are here which means (like Zimbabwe) thousand,hundred thousand and million dollar bank notes will replace 1's.5's,10's,20's,50's,100 dollar notes by Q1 2021!

tokidoki
tokidoki

"The food index rose 1.9 percent over the last 12 months".

Expect this to continue to increase, but hei as long as we have indexes that exclude food, we'll be fine.


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