Stuff Is Cheaper Now Than It Was Last Year, Consumer Price Index Reveals
Even though gas prices keep rising, businesses haven't been sticking customers with price hikes. In fact, the bear economy has staggered the Consumer Price Index once again, with the index rising only 0.1 percent in May. The miniscule, less-than-expected increase, following a flat April, means that prices were 1.3 percent lower in May than they were a year ago — the largest year-over-year drop since 1950.
Bloomberg on the sorta-good news:
"Inflation is not an issue," said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. "There are huge amounts of slack in the economy and demand is quite soft, so it's difficult to see how inflation can pick up for the balance of the year."
Another report showed the U.S. deficit in its current account narrowed in the first quarter to the lowest level since 2001. The gap, the broadest measure of international flows because it includes trade, investment income and government transfers, fell to $101.5 billion from $154.9 billion in the last three months of 2008, the Commerce Department reported.
For reasons the lower costs may not be so great, refer back to our explanation back in April, when things cost 99.9 percent as much as they do today.
U.S. Economy: Consumer Costs Fall Most in Six Decades [Bloomberg]
(Photo: Christina T)
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Comments:
I'm sure part of it is simply supply and demand. There's much less demand for goods because so many people are out of work or working for reduced salaries.
@H3ion: This is why the rising gas prices concern me. You have to realize the impact of the higher gas prices we have today won't hit until later this summer due to the futures contracts.
When that happens, it will cost more to make and transport certain goods and we could be hit with price increases as a result. I've noticed the cost of a gallon of milk has increased steadily in the last couple of months or so.
Some economists say recovery will begin in the third quarter...I have my doubts.
I agree that recovery in the third quarter is looking more and more doubtful. States will be starting their larger rounds of layoffs soon, anytime after July 1st for lots of fiscal years. NC employees are waiting to see if we are getting layoffs or 30 days of unpaid furlough, not a lot of extra cash 'round here.
Thing is...gas prices shouldn't even be rising like they are. The speculators abandoned oil in droves after the market crashes last year, and now they are flocking back. Their "fictional" demand for gas drives it more than "actual" demand. Gas should probably still be like 2.15 a gallon.
@H3ion: I'm sure part of it is simply supply and demand.
Impossible! The basic economic principles of "supply and demand" is a scam put forward by greedy oil companies and greedy big business to make you think they don't control the economy!
@dragonfire81: Milk is at 1.79 here now which is 20 cents less than it was a few weeks ago. The highest I have seen it in the past year or so was 1.99. A dozen of large eggs is also down to 79 cents after being 1.79 during easter 2008.
I wonder how long before the "hyperinflation" crowd joins the party?
@I Love New Jersey:
Yes, and that's a big reason some places have 'lowered' their prices, if by a tiny bit.
Given that, I still don't see these huge, wholesale 'low' prices that are being bandied about in the media.
Everytime I go to buy food, it seems more expensive, same for gas, etc. Other items are discretionary purchases and I'm not buying them because I don't have the cash to do so.
So does this mean the three pallets of rice in my garage are depreciating?
Nice to see the current account deficit is dropping. Yay, Obama!
@Saboth: ...And during the last oil (gold...) bust, they lost a bundle. I think that's why they call it "speculation". Markets for commodities have a habit of enforcing these things pretty well, actually.
The numbers are cooked. There were huge price increases the last couple of years due to gas costs and free credit. Just because this did not continue, does not mean there is no inflation. Prices will have to stay level for 5+ years just to have a normal level of inflation averaged over that time period. It would have been better to have cut out the rotting flesh, cut prices back 50%, and then continued with modest inflation than having a stagnant economy on the brink of hyper-inflation.
I've heard that the opposite of inflation, deflation is a bad thing too. It's best to keep it in the middle so it doesn't get out of control on either side.
Is the bear in that photo cheaper than last year? Can I buy the bear?
@pecan 3.14159265: If you're Canadian, bears are free. "A bear in every igloo" was quite the successful campaign slogan in The Great White North, I hear.
I don't know, seems like my grocery bill continues to rise and certainly gas is going back up. My entertainment purchases (books, music, movies, games) are all more expensive, or at least have not gone down in price. I had to buy a new office chair last week and frankly was surprised that the prices were as high as ever and nothing was on sale.
I suppose big screen TVs are cheaper, but I'm not buying those.
@Saboth:
The Dollar has been losing value against other currencies which led people to invest in commodities such as oil, copper, aluminum, etc. and subsequently raising their prices.
wow this guy is a moron if he doesn't see the monster inflation coming. I've seen prices rise across the board. If you have any business brains you also know that prices aren't going to stay low. They can't stay low because costs are going up dramatically while the value of the dollar is decreasing. Eventually price cuts become futile and people will buy things however expensive they are, because they NEED them. You will see this happening soon.
@minsky: ditto. I'm seeing electronics prices go back down a bit (yay, I might be able to afford to give my soldering iron a workout--and you thought I meant TVs and crap!), but the rest is the same or a bit higher.
However, that's probably why the index is only a hair less. It's taking into account things we might not be buying, that other people may be buying.
Stuff is cheaper for the store operators to buy. Not any cheaper for the end user/consumer though. Usual scenario.
But fewer people have money to buy stuff.