Wednesday, April 14, 2010

Median CPI Annual Inflation Falls for the 18th Straight Month to a New Record Low of 0.6%

According to the Cleveland Fed's report today, the median CPI has increased by 0.60% in March over the last year, the 18th 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 2.3% over the last year (March 2009 to March 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 the median CPI.

Brian Wesbury and Scott Grannis disagree, and see inflationary pressures building.


At 4/14/2010 1:46 PM, Blogger Benjamin Cole said...

Sheesh. Even Dr. Perry gets it. No inflation.

The Fed has license to blast greenbacks down on the economy with orgiastic abandon!

At 4/14/2010 2:24 PM, Anonymous gettingrational said...

I wonder if Bill Gross, manager of the world's biggest mutual fund, was referring to "Bennie, more money, more money? Mr. Gross refers to the rocking horse and the demand for more money! This from his latest commentary and I beleive he manages over a trillion dollars in assets.

At 4/14/2010 2:29 PM, Anonymous morganovich said...

given the way CPI is calculated these days, low historical reads are hardly a surprise.

both the hedonic adjustments and the geometric weighting bias the CPI number down.

you can argue over whether or not the new way or the old way is a better measure of inflation (and i don't want to open that can of worms), but the fact that the methodology change results in lower numbers in a simple mathematical fact.

using the pre clinton methodology, current CPI is over 5.5%.

At 4/14/2010 2:42 PM, Blogger bobble said...

no inflation coming.

the fed may be 'printing' but the money supply is barely expanding.

At 4/14/2010 2:45 PM, Blogger Benjamin Cole said...

getting rational-
Man, was that a long anecdotal lede or what? I have a headache.

Look, the real story is this: Ain't no inflation now, and the USA can pay back debts in dollars.

Print more money, and get the economy going again. I want boomtimes baby.

At 4/14/2010 3:20 PM, Blogger KO said...

I'll post this website again. It graphs mainly IMF data of ag commodities, base metals, energy, etc.

While prices (in dollars) for many things hit record levels in 2007 and 2008, then pulled back, most are still above pre-2006 levels.

Since India and China never stopped growing, it seems like prices only declined due to the slump in the US and Europe.

But add that V in the US to that upward sloping line from Asia and demand will end up higher soon. We're just seeing the period in the middle where demand has not fully recovered.

Some things like beef, fishmeal, cotton, and rubber are already back up.

Right now companies are willing to work with low profit or losses just to stay in the game. But that won't last forever. They'll have to pass increased input costs through down the line. Particularly when employees are no longer happy just to have a job, but will actually want raises and 401k matches again.

At 4/14/2010 6:37 PM, Blogger Unknown said...

OA take a look at the price of iron ore and oil

At 4/15/2010 2:58 AM, Blogger PeakTrader said...

Two powerful factors that limit inflation are productivity, which surged recently, and real wages, which declined slightly (labor is two-thirds of production costs). High productivity and low wages should also boost profits. Job uncertainty may continue to keep inflation low.

At 4/15/2010 9:21 PM, Anonymous Anonymous said...

Two powerful factors that limit inflation are productivity, which surged recently


The best bilge pump in the world is a scared man with a bucket.


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