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First Real Deflation in 50 Years
and they're still talking about INflation??
"Consumer prices dipped unexpectedly in March, leaving inflation over the past year falling at the fastest clip in more than a half-century."
That was the opening sentence in today's most important news story. For the moment, let's leave aside why it's described with the phrase "inflation falling" instead of the word deflation. This article (and the others about the consumer price data) went on to include the following:
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Production at the nation's factories, mines and utilities dropped a seasonally adjusted 1.5 percent in March, the fifth straight monthly decline. That matched February's drop and was worse than the 1 percent dip analysts expected.
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The total industrial capacity utilization rate fell to 69.3 percent from 70.3 percent, the lowest on record dating to 1967...
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More layoffs were announced this week. UBS AG, Switzerland's largest bank, said it expects a first-quarter loss of about $1.75 billion and will cut 8,700 jobs worldwide by the end of next year. ArcelorMittal SA, the world's largest steel maker, said it will idle a plant in Indiana and lay off about 400 workers. Credit card company Discover Financial Services said it plans to cut 500 jobs next month, or 4 percent of its work force.
Now, there is simply no "good news" in those facts; if anything, they would help explain why one bad trend (falling capacity & layoffs) leads to another bad trend (falling prices & deflation). But what this story (and others like it) did instead is say falling prices are not a bad trend and not deflation:
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Job cuts across the economy are expected to keep the lid on wage demands and overall inflation.
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The recession is expected to keep a lid on inflation...
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It [March's price data] was a better performance than the 0.1 percent rise in the Consumer Price Index that economists had expected."
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While some economists have expressed fears the recession could spawn a destabilizing period of falling prices, other analysts point to the rise in core inflation as evidence that deflation remains only a distant threat.
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In fact, some economists worry that all of the moves the Federal Reserve has made to fight the recession and the worst financial crisis in 70 years could be sowing the seeds for inflation troubles down the road.
You get the idea -- falling prices are good, no fear of deflation, if anything be afraid of inflation down the road.
Let me be blunt, dear reader: This is spin-disguised-as-news, and I'll use the following chart instead of an exclamation point:
[+] CLICK TO ENLARGE
That's the year-over-year Consumer Price Index -- and there ain't no spinning a chart like this. It's what deflation looks like.