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January consumer prices tick downward just enough to be negative for first time since 1982

UPDATED at 2 p.m. See updates below:

Consumer prices rose only 0.2 percent in January, the government said moments ago, slightly less than forecasters expected and significantly less than the spike in January wholesale prices reported Thursday.

Removing the volatile energy and food prices, consumer prices -- commonly known as inflation -- actually declined 0.1 percent in January. Removing the energy and food prices and gives a more stable view of whether prices are rising or falling.

Compared to January 2009, consumer prices are up 2.6 percent. Removing food and energy, prices are up 1.6 percent, year-over-year.

Forecasters had been expecting a 0.3 percent gain in the overall consumer price index and a 0.1 percent uptick in the core price index.

Consumer prices rose a modest 0.2 percent in December.

Today's consumer price index follows yesterday's producer price index reading for January, or the price that businesses pay to buy things, which rose unexpectedly.

Wholesale prices rose 1.4 percent, but even with energy and food prices removed, the core index rose 0.3 percent in January. Inevitably, those costs are passed along to consumers, which means consumers may expect a rise in prices in coming months.

UPDATE: It was originally reported that January marked the first time since 1982 that core CPI fell, but I've gotten information now that contradicts that. Am checking with the source, the Bureau of Labor Statistics, to square the two and will update this posting when I have a definitive answer.

UPDATE on the UPDATE:

Finally got to the bottom of the 1982 issues. Quote Bureau of Labor Statistics spokesman Gary Steinberg:

"Each year with the release of the January Consumer Price Index, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine annual recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years. With the data released today, the October 2008 one-month change in the core CPI is 0.0%, so as of today, the last time the CPI core one-month change was negative was in December 1982 when it was -0.1%."

So there you go. Consumer inflation in January was the lowest since 1982. Picking back up where we left of...

The January spike in prices raises fears about inflation, which has been nonexistent throughout 2009, despite the fact that the Federal Reserve flooded the economy with new dollars the previous year in an effort to prevent a liquidity crisis. Indeed, some months in 2009 showed negative inflation (in the overall, not core, number), or deflation, and economists were hoping for some inflation to counter the deflation, which leads to a contraction in the economy.

The common explanation for the lack of inflation is that there is a lot of "slack" in the system. That means the economy has been weak, so consumer demand is low and prices stay low.

But now the economy is showing signs of recovery, as suggested by the fourth-quarter 2009 GDP, which soared to a 5.7 percent annualized rate. And all that extra money is still out there in the system.

In a speech on Thursday, the head of the St. Louis Fed, James Bullard, said inflation expectations are rising in the U.S. economy.

Because inflation raises consumer prices, it throttles consumption. That's especially dangerous in this fledgling, wobbly recovery. Some 70 percent of U.S. GDP comes from consumer spending. With unemployment near 10 percent, and likely to stay there for the remainder of the year, if there is to be a recovery, it will come through spending, not new jobs.

The way to combat inflation is for the Fed to raise interest rates, making money harder to borrow. On Thursday, the Fed raised the interest rate that banks must pay for emergency loans, which will not affect consumers. But it could be a prelude to a hike later this year in the federal funds rate, which is now set between zero and 0.25 percent, which would tighten the money supply and which would raise rates on everything from credit cards to certificates of deposit.

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By Frank Ahrens  |  February 19, 2010; 11:33 AM ET
Categories:  The Ticker  | Tags: consumer price index, inflation, producer price index, wholesale inflation  
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Comments

Let's see this report 6months from now. it's a house of cards ready to fall.

Posted by: redsky28 | February 19, 2010 9:15 AM | Report abuse

Frank, it was the hyperactive fear of inflation that led the Fed to leave interest rates high at the beginning of the Great Depression. This, in turn, exacerbated the downturn and, most likely, is what was responsible for the depth and severity of the Great Depression.

Our current situation is just like the Great Depression. We had a gigantic bubble that burst, leading to a massive credit crunch. Therefore, this continued worry over inflation is both wrong and dangerous. If we try to tackle the non-existent inflation, we will merely prolong and exacerbate this recession. Don't repeat history!

Posted by: rlalumiere | February 19, 2010 9:18 AM | Report abuse

Excluding food and energy? Whether volatile or not, isn't that what people spend a large amount of their money on?

Posted by: brewstercounty | February 19, 2010 9:18 AM | Report abuse

So, as long as we stop eating and turn the heat off in the middle of winter, we should be okay. The adjusted CPI is the biggest hoax perpetrated on the American public. Energy prices aren't volatile -- they just continue to go up and up.

Posted by: marmac5 | February 19, 2010 9:20 AM | Report abuse

Only on the "Alice In Wonderland" world of this administration could an increase in prices be considered a lowering of prices.Of course when you remove the troublesome areas you can say that prices are lowering.
The fact remains that Food and Energy are large ticket items for the average family.
Food in particular is much more expensive than it was not long ago, especially when you consider the fact that the amounts in a package keeps getting smaller.
A pound of coffee is now 10 or 11 ounces, Ice cream that use to be in 1/2 gallon packages in now just about enough to fill a cone.

Posted by: garys_opinion | February 19, 2010 9:25 AM | Report abuse

Tell me, why does "Removing the energy and food prices and gives a more stable view of whether prices are rising or falling," since those components are what many people spend the most on, besides the mortgage or rent???

Everyone I know who talks about it is baffled and always ask, why exclude food and energy prices, those are the most or next-to most important expenditures each month...Or is it more massaging by the government to paint a rosier picture than reality merits?

Posted by: robertwriter1 | February 19, 2010 9:33 AM | Report abuse

One root cause of our economic problems are the bogus inflation numbers produced by the Bureau of Labor Statistics. Inflation is the most important feedback to a capitalist economy and our government, as forced by the Fed, is lying about inflation.

IF monthly inflation went down for the first time since 1982, then why did the BLS report that the COLA, a key adjustment index for Social Security payments, went DOWN 4.0% in 2008?

Posted by: hz9604 | February 19, 2010 9:35 AM | Report abuse

I'm gonna go ahead and call BS.

On Feb 18 the WashingtonPost published this,

"News Alert: Wholesale inflation surges; jobless claims rise
08:32 AM EST Thursday, February 18, 2010"

If wholesale inflation is rising and consumer inflation is stable or falling it just means that retailers are taking a hit by trying to entice shoppers to come out from their shells. We should stop massaging the numbers and be honest with ourselves, maybe we'd have a better chance of working together if we all could be honest about the problems.

Posted by: BertrandJRivire | February 19, 2010 9:37 AM | Report abuse

hasnt risen since 1982.
but ROSE .2%
???
did it not rise?
or did it rise .2%
did they 'revise' last months numbers?
Alot of REVISING has been going on!!!

Posted by: simonsays1 | February 19, 2010 9:45 AM | Report abuse

brewstercounty said "Excluding food and energy? Whether volatile or not, isn't that what people spend a large amount of their money on?"

Yes, exactly. People will continue to buy food, gas and heating fuels no matter how expensive they get. Excluding them from "core" prices shows elective purchases.

Posted by: lilkender | February 19, 2010 9:50 AM | Report abuse

FELL?! - What planet have you been living on? Maybe you never eat! I kept tract of all my expenses (every year) FOR LAST YEAR-2009 (AND 2008 BEFRE);- amazing, but True- over-all prices went up in 2008 approx 7-9%, and in 2009- approx 9-11%. So get Real! We on SSDI - Social Security Disability Insurance,- were Forced, as past workers, to $pay into Social Security!! We worked, and had NO Choice. Now, as Disabled, we expect decent returns, and benefits on Our' SS payments. If CONGRESS did Not invest wisely Our SS Funds,- then that should be their' problem, not the Disabled past Taxpayer Citizen!! - A realistic "COLA" for 2010 should be at a minimum of at least 6% just to barely keep up. But, what was the 2010 COLA? - An unbelievable 'ZILCH'!! - That is Criminal, and CONGRESS should be held accountable for extreme waste & $Bail-Outs to their' $BANKster crony friends. -- A fair "COLA" of at least 41-44% is the minimum necessary to just get barely caught up from the criminal Bush / Cheney years. Now, even President OBAMA, and this Democrat Congress IS ALSO in bed with the $BANKsters & $WALLsters. And 'turn-coats' against the most Suffering of Our U.S. Citizens,- the DISABLED & ELDERLY Living in "POVERTY"!! -- If a member of Congress, and not for a Livable SS COLA, then he/she should shoot him/her self from absolute Shame!! Appalling to the Max as Citizens of this great Republic of the U.S.A.!!

Posted by: jward52 | February 19, 2010 10:06 AM | Report abuse

The government and media must think the American people are ignorant to keep feeding us BS about the economy.

They need to take off the rose colored glasses and stop the con jobs.

Posted by: OldHippie | February 19, 2010 10:07 AM | Report abuse

The major issue with the global economy is finding the kind of investment that can produce sustainable growth. The major inflation danger is that the large liquidity pumped into the global economy by governments in an attempt to stimulate productive investment winds up inflating asset bubbles created by the momentum of financial speculation. The Fed seems to be sending a relatively clear signal to financial markets that it is done with its extraordinary injection of liquidity. But it is going to take another year or two to understand how much of that liquidity and the liquidity generated globally actually finds its way into investments that sustain growth and provide a reasonable long term return on the invested money. If the Fed really has decided to turn off the pump, it is at least one good step. The path to sustainable growth may well prove more difficult than the current conventional wisdom wants to believe. But printing more money is not likely to help.

Posted by: dnjake | February 19, 2010 10:17 AM | Report abuse

"In a speech on Thursday, the head of the St. Louis Fed, James Bullard, said inflation expectations are rising in the U.S. economy."

The Fed, with speeches like Bullard's (a perma-hawk on inflation) and yesterday's impactless hike, is trying to persuade us that things are on the mend.
The Bank of Japan tried to do the same thing after every major fiscal stimulus package, didn't work. Won't work this time.

Posted by: trblmkr1 | February 19, 2010 10:18 AM | Report abuse

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Posted by: ywyytruytihertwrey | February 19, 2010 10:19 AM | Report abuse

So which corporations paid for the Fed to hike interest rates?

We all know that truth hides in the shadows and is spoken only by phantoms.

Posted by: dwyerj1 | February 19, 2010 10:28 AM | Report abuse

In circles of men who possess an ounce of sense or intuition, this would be classified as a strong sign of a DEFLATIONARY DEPRESSION. But, in the circles of men today, there is only water-carrying and supposed reporting of the facts which seem to contradict eachother with every passing day.

The fact that there is no inflation, actually deflation, says that this depression has only just begun and the fact is, the American people won't see it in full force until after November's midterms.

Interesting that GW Bush claimed there was no recession until just prior to the election in 2008, then the entire campaign shifted towards the economy and away from Bush-related corruption, etc. Then, for a full year, the Obama administration tells us nothing except that they've fixed it up perfectly for us, saved us all from dire consequence and the wh*ring of our loved ones for food.
Yet, go figure, each party stands at a precipice in this election year.
So, what kind of truth do you think you'll find from these cronies and marketeers?

In America, where we all pick and choose our own truths based on what's convenient for our particular personality, the fact that we are seeing deflation even as the government's debt, deficit and spending has toppled records demonstrates one solid fact, this is a depression and no amount of government stimulus will thwart the tide of essential change which will come. This change should not be confused with the marketed theory of hopeful change put out by the Obama Administration in hopes that the American people would sit silently as their country's government demonstrates irreparable physical, mental and symbolic damage.
This change I speak of will be catastrophic and absolutely devastating to the average American's standard of life.

Posted by: TheFreeMan | February 19, 2010 10:29 AM | Report abuse

Core inflation is a joke: you can't eat iPods, live in one, or fill your gas tank with them to make your car go.

Inflation is out of control: gas @ $3/gallon after Katrina was unheard of, and now we're near there in the dead of winter. Corn is fed to animals and used to sweeten everything, and the price of it is exploding because somebody thought it was a good idea to favor putting corn in our gas tank, instead of sugar...because clearly sugar can't work since Brazil is fuel-independent thanks to sugarcane-based ethanol...

Housing is on the mend! So says reports from people with a vested interest (IE their incomes) in saying so - clearly it must be true! Conflict of interest? What's that?

Posted by: shapeshifter77 | February 19, 2010 10:43 AM | Report abuse

Approx 25% of core inflation is the renter's equivalent index. The REAL price we pay for the things we consume every day is rising far faster than the still moribund housing industry.

Posted by: AlibiFarmer | February 19, 2010 10:46 AM | Report abuse

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..."I voted for President Barack Obama, and I along with the Majority of American's know he's doing a good job, at least he's on the side of the Middle Class, and especially the POOR!

Wow just look at the MESS the Republicans have made, lost eight and a half million jobs, left you/all/American's a record debt/deficit $1.5 TRILLION DOLLARS, and my favorite fact, left office with the lowest job approval rating in the history of the United States Presidency 20%, be sure now YOU RUn and vote for another Republican they sure do appreciate it...

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Posted by: ztcb41 | February 19, 2010 10:53 AM | Report abuse

So, with only pennies in their pocket for they're next meal and living from paycheck to paycheck (if they havn't been already laid off), the American people should be celebrating the fact that inflation has been held in check. Yep, the folks that I work with were high-fiving over coffee this morning.

Posted by: JAH3 | February 19, 2010 10:53 AM | Report abuse

Economist reading goat entrails. Who really cares about a quarter percent change in anything? A month from now, we'll be wondering why this story was written at all.

BTW, tea-baggers. Those of us with attention spans longer than a cricket's still remember that the seeds for the current economic crisis were planted when Bush cut taxes and the Fed slashed interest rates. A disaster that was eight year in the making isn't going to be fixed by ANYBODY in just a year or two. It wouldn't matter to me if Dick Cheney were President. It would still gag me on an intellectual level to accuse him of malfeasance if he took the sames steps toward recovery as Obama has done. He'd have to call for another round of tax cuts for the wealthy or the invasion of Iran before I started pointing fingers.

Posted by: st50taw | February 19, 2010 10:56 AM | Report abuse

The index is a load of horse poo and every body knows it. EVERYBODY.

How can the gov't justify taking out the 2 biggest expenditures from the inflation index and think we're not going to notice that our paychecks cover less and less month after month? With an economy built on consumption is spells absolute disaster. For every ten cents that gas increase it shrinks our economy by over $40 billion dollars.

The Fed just wants to hand out free money to lending institutions so they can continue to fleece those of us who still have good enough credit to borrow. I agree we can't raise rates too quickly now because we're hooked on cheap credit, but at some point this has to stop. The question is when will our economy actually be strong enough to handle the shock?

Posted by: theobserver4 | February 19, 2010 11:04 AM | Report abuse

Core inflation is a joke: you can't eat iPods, live in one, or fill your gas tank with them to make your car go.

Inflation is out of control: gas @ $3/gallon after Katrina was unheard of, and now we're near there in the dead of winter. Corn is fed to animals and used to sweeten everything, and the price of it is exploding because somebody thought it was a good idea to favor putting corn in our gas tank, instead of sugar...because clearly sugar can't work since Brazil is fuel-independent thanks to sugarcane-based ethanol...

Posted by: shapeshifter77
******************************************
Right on. Switchgrass works pretty well, too.

Posted by: st50taw | February 19, 2010 11:16 AM | Report abuse

It's so simple: just cut out the food and energy and you're on easy street. Duh.

Posted by: Godfather_of_Goals | February 19, 2010 11:26 AM | Report abuse

There is inflation, and there is everyone's perception of inflation. How quickly we forget. Not that many months ago natural gas was over $1.50 and headed higher. Now the average price is about half of that. Gasoline was close to or over $4. Now it's under $3.

Posted by: RAB2 | February 19, 2010 11:29 AM | Report abuse

I guess that mean a pair of Uggs went down .02%. Gee, maybe I will eat Uggs and put them in my gas tank to drive to work.

Posted by: Cornell1984 | February 19, 2010 11:30 AM | Report abuse

MY propone cost almost double this year. Barrel of oil did not. But sense people are worried about there future all prices go up based on this future.

On the other hand the claim the government saved us from a depression is simply another government claim. And they are not been right on there claims too many times. The last government claim was on weopons of mass destruction.

One can take government claims with a grain of salt. What really happened is that they delayed the Great Depression. The last great depression did not distroy the government but this new on will. As everyone knows it is not over until the fat lady sings.

Look for a delayed great depression as the government tries to cover what is really happening long-term for what is happening short-term. The loss of 13 tillion dollars in wealth is not coming back. No matter how you move figures around.

Posted by: artg | February 19, 2010 11:43 AM | Report abuse

I understand and can see the rises in food and energy prices. My problem is with CORE inflation.

I assume that core inflation is everything other than food and energy. That would include health care, housing, higher education, veterinarian services, automobiles, etc. Housing was rising at 20% a year a few years ago and it did not even figure into the inflation numbers-- even though the financial system was facilitating a rise in housing and should have been sending signals to the Fed (as China central planners have now recognized and acted upon) that things were out of control.

If you look at core inflation, you would think that none of these core components are rising faster than 1-2% a year.

That just is not true.

If I were President, my day one task would be to demand an accurate inflation number that bears some resemblance to the prices consumers pay. This decoupling of inflation and the prices consumers actually pay is destroying our economy.

This is the Great Greenspan Depression.
.

Posted by: hz9604 | February 19, 2010 11:55 AM | Report abuse

MY HUSBAND AN I WORK 3 JOBS AN ARE STRUGGLING. INFLATION IS OUT OF CONTROL. I WANT MY HUSBAND BACK. HE IS A HARD WORKING MAN FOR THAT I'AM BLESSED. WE DON'T GET TO SEE EACH OTHER ENOUGH NOW THAT ECONOMY HAS TOOK A WILD HAIRY YOU KNOW WHAT? HERE IN TEXAS WE PAY THE HIGHEST ELECTRIC BILLS IN THE USA! BIG OIL IS GETTING AWAY WITH PRICE GOUGING AT THE GAS PUMP! THE PRICE IS DIFFERANT EVERYDAY AN FLUCTRIATES DAILY PRICE GOES UP AN DOWN. IT'S CRIMINAL ACTS AGAINST ALL OF AMERICANS.

Posted by: JWTX | February 19, 2010 12:11 PM | Report abuse

"Excluding food and energy? Whether volatile or not, isn't that what people spend a large amount of their money on?"

The CPI, is scarcely more a measure of true inflation than the celsius scale.

As currently formulated, the CPI a fabricated figure that is intentionally kept low in order to control the cost of Federal entitlements and union labor rates -- many of which are tied to the rate of inflation.

Just for giggles, why don't you ask Mr. Ahrens to tell the joke that is substitution bias?

Posted by: BurgundyNGold | February 19, 2010 3:13 PM | Report abuse

rlalumiere (February 19, 2010 9:18 AM):
I completely agree with you.
While I don't think we're yet at the depth of the Great Depression, our economic situation is much the same and needs the same remedies.
But because of cries of "I want him to fail" (what they don't acknowledge is that what they really are asking for is economic failure of the entire nation) and complete Congressional gridlock, we are powerless to counter the mess and it will continue to plague us.
(My estimate is we are likely to remain in this morass for about 20 years.)
Therefore:
I agree with ztcb41 (February 19, 2010 10:53 AM):
"Be sure now YOU run and vote for another Republican. They sure do appreciate it ..."
==
The foul attitude of the electorate right now is appalling.
This country is in great danger right now.
Truth is, we may never recover from this mess.
I would truly enjoy seeing the U.S. experience a resurgence, but I truly doubt I will live to see it come about.

Posted by: Judy-in-TX | February 19, 2010 4:17 PM | Report abuse

That article has to be one of the most misleading I have read. Even though ahrens tried to "spin the information" it is obvious that inflation for consumable items is high.
Energy and food prices appear to be on an annualized inflation rate of 24-36%.

Posted by: dlbrad6 | February 20, 2010 12:39 PM | Report abuse

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