The U.S. consumer price index for August came in pretty much as expected with a 0.3-per-cent gain, but the big news was the flat reading on the “core” index (which excludes food and energy). This is the metric that the markets and central banks focus on since food and energy tend to be volatile and related more to periodic supply factors than fundamental demand factors.
This CPI core index has now been at 0.1 per cent or below for nine of the past last 10 months and the year-over-year trend, at 0.9 per cent, has been below 1 per cent for five months running. Historically, back to 1957, I can only see this sub-1-per-cent trend happening for this long in 1960 – when the U.S. economy was in recession.
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