Wednesday, May 19, 2010

Median CPI Annual Inflation Falls for 19th Straight Month to a Record Low of 0.5% = No Inflation

According to the Cleveland Fed's report today, the median CPI increased by 0.50% in April over the last year, the 19th consecutive monthly drop in the median CPI annual inflation rate, and the lowest year-to-year inflation rate in the history of the Cleveland Fed's series back to 1984 (see chart above). In contrast, the regular CPI has increased by 2.2% over the last year (April 2009 to April 2010).

Historically, the median CPI has been 50% more accurate at gauging future inflation than the traditional CPI (based on the
Cleveland Fed's research), and the median CPI is certainly not now showing any signs of inflationary pressures. In fact, a stronger case could be made for deflation right now than inflation, according to: a) the median CPI, and b) the decelerating growth of the money supply, see this CD post from yesterday.

According to "inflation skeptic" Bob McTeer (former Dallas Fed president): "To repeat the obvious, because others won’t, money growth is almost flat. Flat money growth does not cause inflation—especially when we have enormous slack in the economy along with rapid productivity growth and declining unit labor cost. We may get inflation in the next few years, but, if so, it will be based on money growth yet to happen. It hasn’t happened yet."


At 5/19/2010 11:55 AM, Anonymous Benny The Man said...

Inflation is dead.
You know how Jimmy Hoffa is dead?
Now think about inflation, and you get the picture.

At 5/19/2010 3:22 PM, Anonymous morganovich said...

at a certain point, the adjustments to a number begin to occlude more than they help reveal.

we are way past that point on CPI.

April Consumer Prices Dropped A Notch, Providing Your Life Is Seasonally Adjusted. The Bureau of Labor Statistics (BLS) reported a downtick in monthly CPI-U inflation, thanks to seasonal adjustments that continue to depress the reported inflation contribution from rising gasoline prices. Month-to-month, seasonally-adjusted gasoline prices were reported down by 2.4%, but the BLS indicated gasoline costs actually rose by 2.9% for the month (the Department of Energy estimated a 2.7% monthly gain), before the numbers were seasonally adjusted.

For the individual who has to fill his or her gas tank with cash from not-seasonally-adjusted take-home pay, the unadjusted monthly inflation rate is the most relevant one. The most meaningful inflation measure overall is unadjusted on a year-to-year basis, with April CPI-U up by 2.2% and April gasoline prices up by 38.3%.

At 5/19/2010 10:47 PM, Anonymous Anonymous said...

According to First Trust's analysis of April's PPI, inflation is dead only because one doesn't know where to look. Inflation's coming, folks. You've been warned...

"Led by falling energy prices, producer prices pulled back 0.1% in April. This follows a five-month period when prices climbed at a 9% annual rate and, even with April factored-in, the six-month gain is still at a 7.3% rate. In other words, we don’t see this report as a reason for the Federal Reserve to stay dovish on inflation. What’s really interesting is that “core” inflation, which excludes food and energy, increased 0.2% in April and shows much more acceleration deeper in the production process. Core intermediate prices were up 1.1% in April and are up at a 8.3% annual rate in the past six months; core crude prices increased 4% in April and are up at a 47.9% annual rate in the past six months. In fact, core crude prices are up 49.7% in the past year, the largest increase since the early 1970s. “Core” inflation may be a more important measure to follow over the next few months as
speculation over Europe’s debt problems have helped drive down
commodity prices in dollar terms. The bottom line is that the
underlying trend in producer price inflation remains too high and will accelerate in the years ahead due to too loose a monetary policy from the Fed. The longer the Fed waits to respond the more serious the inflation problem will become."


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