PPI

The Deflationary Bust is Bottoming? June 2009 edition

This is a continuation of a monthly series that up until now has been called The Deflationary Bust Deepens. Each month I have been tracking the progress of this first full-fledged deflationary bust in over 50 years, comparing the progress of deflationary consumer and producer prices now with the pattern of the 5 deflationary busts between 1920-1950, including the Great Depression.

Yesterday morning the BLS reported that consumer inflation increased +0.7% (seasonally adjusted) in June, (rising 0.9% non-seasonally adjusted). Year-over-year prices have fallen - 1.4% (NSA) into deflation. YoY consumer deflation is only surpassed by 1949's -2.9% in the post-Depression era.

The Deflationary Bust Deepens: May 2009 edition

This morning the BLS reported that consumer inflation increased +0.1% (seasonally adjusted) in May, (rising 0.3% non-seasonally adjusted). Year-over-year prices have fallen -1.3% into deflation. YoY consumer deflation is only surpassed by 1949 in the post-Depression era.

The first 5 months of inflation data are still in accord with the optimistic scenario I laid out in January:

In the Optimistic scenario, the fiscal and monetary stimuli, together with intelligent new political leadership in Washington, halt the meltdown perhaps by mid-year, and wage reductions remain the exception. In the Pessimistic scenario, the stimuli fail, and wage reductions spread, leading to a wage-price deflationary spiral.