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The Labor Department tells us today that Producer Prices climbed 1.4% in January suggesting that inflation is beginning to rise. This is in stark contrast, however, to what we've heard from corporate America during this earnings season.

Wal-Mart had an announcement of its own today: its 4th quarter and fiscal year earnings (ending January 31). Unlike the PPI, Wal-Mart saw/created significant deflation over the past few months:
 

The world’s largest retailer, reported fourth-quarter sales that trailed its projection after cutting grocery and electronics prices, and predicted a “challenging” first quarter for U.S. stores. Sales at U.S. stores open at least a year fell 1.6 percent, the Bentonville, Arkansas-based company said today in a statement. Wal-Mart had projected sales to decline no more than 1 percent. Wal-Mart reduced prices on laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. The deflation hurt sales…

There's deflation at the retail level. Archer Daniels Midland confirmed this price deflation at the producer level earlier this month in its earnings report:

[ADM's] Revenue decreased 4.6% to $15.91 billion as higher sales volumes and foreign-exchange impacts were more than offset by lower average selling prices because of reduced commodities costs.

Another company reporting today, Deere, saw its earnings affected positively by price deflation:

Profit from equipment operations in the quarter ended Jan. 31 gained 2.6 percent to $315 million, mostly because of lower materials costs, Deere said. Material and logistics costs fell about $160 million in the quarter, the company said. The average price of U.S. hot-rolled steel sheet was about $516 a ton in the three months ended Jan. 31, according to figures published by Purchasing magazine. That’s down 12 percent from an average of about $587 in the same period a year earlier.

So who should we believe: the labor department (with all of their accounting shenanigans) or corporate America (and all of theirs). While I'm watching the government's inflation numbers I'm listening a bit closer to the companies in the real world for a more accurate inflation picture. And all I'm hearing right now is “deflation.”

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