Disinflation continues in personal consumption expenditures

Despite the springtime optimism of almost everyone else, Demand Side continues to say we are bouncing along the bottom, and there is no recovery.  Unemployment has stabilized at 9.7 percent, according to latest figures, and house prices are no longer going down, BUT...

Personal income is flat, and investment is nonexistent, except for the government's stimulus spending.  The reason investment is flat is real assets continue to deflate in value.  Two weeks without bad news does not change this.

Here is the deflation data on PCE, personal consumption expenditures.  Not real assets. But indicative of the stagnation, very reminiscent of what Seymour Harris, a Keynesian, expected to result from the end of WW2.  Again, absent a reduction in the private debt, there will be no meaningful recovery.

Disinflation Continues...

 by Mark Thoma
Economist's View
April 2, 2010


Despite all the worries about inflation, the latest release of the Dallas Fed's Trimmed mean PCE inflation calculations (a measure of the core rate of inflation) indicates that inflation is still headed downward:

[click to enlarge]

"The trimmed mean PCE inflation rate is an alternative measure of core inflation in the price index for Personal Consumption Expenditures"

Here are the recent data for the 12-month inflation rate (3/29 release):

	12-month
Mar-09	2.26
Apr-09	2.24
May-09	2.08
Jun-09	1.94
Jul-09	1.66
Aug-09	1.60
Sep-09	1.45
Oct-09	1.51
Nov-09	1.40
Dec-09	1.37
Jan-10	1.18
Feb-10	1.04