Thursday, January 19, 2012

Inflation remains relatively tame


The headline Consumer Price Index in December was flat, compared to expectations of a 0.1% increase. On a year-over-year basis, the CPI has fallen from a high of 3.9% to 2.4% in the past three months. As this chart shows, all of that decline was due to energy prices, which have been relatively flat to down for the past three months (oil was up but gasoline prices have fallen and natural gas prices have dropped significantly). The CPI ex-energy has continued to pick up.

Inflation is not dead, deflation is not a threat, and so far inflation has not been the problem I thought it would be. Thank goodness.

3 comments:

Benjamin said...

Inflation not dead? What do you call the last three months? Down once, and flat twice. Reminds me of my boxing career.

Unit Labor Costs are lower today than in 2008!!!

Real estate is selling for half of 2008-9 levels.

The DJIA is below 1999 levels.

This is not deflation?

Assets have been deflated---I hope for better news, but I have been hoping for a while.

Dr William J McKibbin said...

Benjamin, exploit the deflation -- don't look back...

Public Library said...

Deflation is never really a threat in the modern fiat world. Lack of understanding about deflation, metal standards, and control over printing presses ensures we will never deflation. Ben that means price declines across the board, not just in real estate.

You can guess what we should expect in the future as Scott points out. Infaltion higher than expectations...