DEFLATION....Economists have been warning about the possibility of deflation for the past several months, and it looks like we might finally be getting it:Considering this drop in CPI was during a major leveling off of gas prices, as oil now hovers around $60/barrel, we may see these lower prices increase demand. If you still have a job, that is.
The Consumer Price Index, a key measure of how much Americans spend on groceries, clothing, entertainment and other goods and services, fell by 1 percent in October....Energy prices led the decline, falling 8.6 percent in October as the price of gasoline continued its steady slide from highs of more than $4 a gallon.
....In Wednesday’s report, even excluding volatile food and energy prices, prices dropped 0.1 percent in October. It was the first such decline in more than two decades and raises the specter of deflation as the economy contracts and demand for goods and services across the board plunges.
“This month it’s more than slowing, it’s outright contraction,” [James] O’Sullivan said. “And yes, if you extrapolate that, it’s deflation.”
It's only 0.1% and it's only for one month — so far. But that's the biggest drop since 1982, and the drop in the primary CPI number is the biggest since 1947, yet another indication that our current recession is on track to be the worst we've suffered since World War II. More stimulus, please.
Source: Kevin Drum
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