The major news media are reporting on the inflation numbers released today calling it the first decline in core inflation (everything minus food and energy) since 1982. It seems to me that core inflation declined back in October 2008. The graphic below comes directly from the BLS release for that month:
Regardless of whether it is the first or second time we’ve seen core deflation in consumer prices in the last thirty years, we shouldn’t be surprised by this negative number. Corporate America has been bemoaning deflationary forces pretty consistently during the past month or so in their earnings reports.
For this deflation to show up now in the consumer price report (which we should probably take with a grain of salt anyway) is only natural. However, the fact that core first weakened last October and remains weak today is of a particular significance. It is rare for this number to print one negative number let alone two in less than 18 months.
I take it as just another sign that deleveraging at the consumer level is in full effect and that we should be prepared for its associated risks.
For more information on this topic download the January issue of “The Felder Report.”