Gas Price Drop puts U.S. into Deflation Territory

Deflation says hello to the U.S. economy.

As published today, consumer prices fell 0.1% year-over-year in January.

What does this mean?  It depends on how long deflation lasts.

There are signs the economy is strengthening.  Walmart raised wages for its workers.

Rising wages are good for workers and the economy, especially if the prices of goods and services remain steady.

Deflation can be a difficult animal: dangerous if it stays, but merely interesting if it visits and goes away.  It is important to watch.     PB
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From the Wall Street Journal:

The consumer-price index, which measures what Americans pay for everything from shirts to haircuts, fell a seasonally adjusted 0.7% in January from December, the Labor Department said Thursday.

From a year earlier, prices declined 0.1%.

It was the first year-over-year decrease since October 2009.

Excluding food and energy, prices were up 0.2% last month and rose 1.6% from a year earlier.

Economists surveyed by The Wall Street Journal had expected a 0.6% decline in overall prices in January from December and a 0.1% gain for core prices on the month...

Judging whether very weak inflation is a temporary phenomenon due to a drop in oil prices or indicative of broader movements in the global economy will weigh heavily on Fed policy makers...

A separate report Thursday showed Americans’ inflation-adjusted wages posted the largest gain in more than six years in January.

Real average hourly earnings move up 1.2% from December, reflecting both a 0.5% increase in wages and falling prices.

The gain was the largest since November 2008, a month when the CPI fell 1.8%...
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Link: http://www.wsj.com/articles/consumer-price-index-down-0-7-in-january-1424958010