U.S. Consumer prices drop 1.7% in November

December 16, 2008 by · Leave a Comment
Filed under: Economic News 

Deflation is certainly a risk at this point and I believe it is necessary in most asset classes to bring it back into balance with wage incomes.  I understand this is going to create losses in the market but this should be welcome in the sense that this will bring balance with the average person.  It is interesting that the Fed cutting rates to between 0-.25% made the markets rally 359 points with numbers like these.  If it is true deflation for the moment then I would tend to think it will be harder for companies to make their earning numbers.

News:

U.S. consumer prices fell in November at the fastest rate since 1932, the darkest days of the Great Depression, the Labor Department reported Tuesday, as prices for energy, commodities and airline fares plunged across the country.

The U.S. consumer price index fell by a seasonally adjusted 1.7%, the department reported, the biggest drop since the government began adjusting the CPI for seasonal factors in 1947.  But on a non-seasonally adjusted basis, the CPI fell by 1.9%, the biggest decline since January 1932, at the nadir of the Great Depression. Read MarketWatch First Take commentary.

“This is scary stuff,” said Mike Schenk, an economist for Credit Union National Association. “We are teetering on the brink of a massive downward spiral. Deflation is a threat.”  The seasonally adjusted core CPI was flat in November. Read the report

Source: MarketWatch
  

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