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US Posts First Negative Inflation Print Since Lehman On Gas Price Plunge

As previewed earlier today, January CPI data was historic in that, 6 years after Lehman, the US just reported its first negative headline CPI print, with overall inflation, or rather deflation, in January coming at -0.1%, in line with expectations, and down from the 0.8% in December. On a monthly basis, CPI tumbled by 0.7% from December, driven almost entirely by collapsing energy prices. Excluding the Great financial crisis, one has to go back a few years to find the last time the US posted annual headline deflation.... all the way back to August 1955, or just about the time Marty McFly was trying not to dance with his mother.

 

Here is the culprit for the plunge: "The energy index fell 9.7 percent as the gasoline index fell 18.7 percent in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been  unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose."

Gasoline:

However it wasn't just energy deflation: "The food index was unchanged in January, with the food at home index falling for the first time since May 2013."

So much for the good news: the bad news is that away from crashing energy prices, Americans continued to pay more for all other goods and services, with Core CPI rising 0.2%, more than the 0.1% expected, and in line with the revised December data:

The index for all items less food and energy rose 0.2 percent in January. The shelter index rose 0.3 percent, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco.

Some more on the core data series:

The index for all items less food and energy increased 0.2 percent in January. The shelter index increased 0.3 percent, with the rent and owners' equivalent rent indexes both rising 0.2 percent and the index for lodging away from home rising 1.3 percent. The personal care index rose 0.6 percent in January, its largest increase since the inception of the index in 1999. The apparel index rose 0.3 percent, and the recreation index increased 0.2 percent. The index for medical care was unchanged in January, with the index for medical care services rising, but the medical care commodities index falling. Several indexes posted modest declines in January. The index for household furnishings and operations fell 0.2 percent, and the indexes for new vehicles and for used cars and trucks both fell 0.1 percent. The index for alcoholic beverages fell 0.3 percent, as did the index for airline fares. The tobacco index also declined, falling 0.2 percent after rising in December.

 

The index for all items less food and energy has risen 1.6 percent over the past 12 months, the same figure as for the 12 months ending December. The index for shelter has risen 2.9 percent over the span, and the indexes for medical care, for new vehicles, and for alcoholic beverages are among those that have also increased. Indexes that have declined over the past year include those for used cars and trucks, airline fares, household furnishings and operations, and apparel.

And back to the headline data: "The all items index declined 0.1 percent over the last 12 months, the first negative 12-month change since the period ending October 2009. The energy index fell 19.6 percent over the span, with the gasoline index down 35.4 percent. The food index rose 3.2 percent, and the index for all items less food and energy increased 1.6 percent"

The full breakdown by components:

The spin of course, is that with core CPI coming in stronger than expected, and the "transitory" commodity crash supposedly behind us, there is only inflation ahead, and as a result, the USD is surging as the manic, bipolar market now assumes that a June rate hike is, once again, inevitable.