Still More Deflation

This morning’s CPI showed that inflation fell by 0.1% last month. This was the third monthly drop in a row. This comes after the CPI fell by 0.8% in April.

In the 12 months through May, the CPI gained 0.1%. That was the smallest year-on-year rise since September 2015 and followed a 0.3% increase in April. Economists polled by Reuters had forecast the CPI would be unchanged in May and gain 0.2% year-on-year.

The National Bureau of Economic Research, the arbiter of U.S. recessions, declared on Monday that the economy slipped into recession in February. Nonessential businesses were shuttered in much of the country in mid-March to slow the spread of COVID-19, the respiratory illness caused by the novel coronavirus, almost bringing the economy to a halt.

Excluding the volatile food and energy components, the CPI slipped 0.1% in May after decreasing 0.4% in April, the largest drop since the series started in 1957. The so-called core CPI fell in March for the first time since January 2010.

The stock market is down a bit today. The Federal Reserve’s policy statement will come out this afternoon. Also, Chairman Powell will hold a press conference.

Here’s a look at the monthly change in the core rate. It appears to be getting back to normal. We’ll see.

Posted by on June 10th, 2020 at 12:00 pm


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