“..never since the mid-1960s, when records began, has core CPI (less food, energy and shelter) declined over a six-month period..”
• Deflation Is Already Here – Albert Edwards[/b (ZH)
… broader inflation trends continue to disappoint. Furthermore, when digging through the recent CPI data, Edwards noticed something unexpected: as he writes, although wages have accelerated due to the tight labor market, the last six months has seen consistent downside surprises. And then this: “this has come hand-in-hand with an unprecedented slump in underlying US CPI inflation into outright deflation – in stark contrast to the eurozone where core CPI inflation has decisively risen.” Putting the finding in context, the “wrong, too optimistic” Edwards writes that never since the mid-1960s, when records began, has core CPI (less food, energy and shelter) declined over a six-month period, as demonstrated by the red line in the chart below. Or, as he summarizes, “Deflation did not need another US recession to emerge. It is already here.”
the SocGen strategist has some advice to the Fed: “If I were a Fed Governor I would be pretty shocked/concerned/bemused at inflation developments this year. However confident the Fed is of a self-sustaining-recovery, there is growing evidence of a slide into outright deflation even ahead of the next recession which will likely unambiguously take us deep into deflationary territory.” Imminent deflationary prints notwithstanding, Edwards still thinks rates should be normalised. Why? “Well, because the longer the current credit excesses are allowed to continue, the deeper the next recession and deflationary bust will ultimately be.”
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