Photo: 
Bloomberg
Coming to America: deflation

When will Americans start hearing about deflation? Sooner than you may think. The global oil-price collapse has made petrol much cheaper—which is why the consumer price index, to be reported today, probably fell by 0.4% in December from November and rose by only 0.7% from a year earlier. Next month the annual change may turn negative, because petrol prices have fallen further in January. All else being equal, this is a boon to consumers’ buying power and thus economic growth. It’s more worrisome if deflationary pressure spreads, which is a reason to watch the price index excluding food and energy. Wall Street thinks that in December it rose by 0.1% month-on-month and 1.7% year-on-year. Look out, too, for broader reverberations from the sell-off in commodities. A disappointing performance by industrial production in December, also reported today, would fan such fears.

Jan 16th 2015
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