|Consumer Price Index: Change from Previous Year|
The Winds of Deflation
Three economic reports today (Friday) that should sound warning bells about deflation.
1. The Labor Department reports that consumer prices are essentially flat. Compared to August 2009, prices are up 1.1 percent. That's only slightly lower than the 1.2 percent year-on-year rise in July. Excluding volatile food and energy, however, consumer prices in August were 0.9 percent higher than a year earlier. That's below the Fed's informal inflation target of between 1.5 percent and 2.0 percent.
2. In a separate report, the Labor Department said real average weekly earnings were unchanged in August from July, as both the average work week and hourly earnings were flat.
3. The Thomson Reuters/University of Michigan September reading of consumer confidence shows consumers more pessimistic in September than in August. In fact, consumer sentiment is the lowest since August 2009.