Inflation vs. Deflation: Here's What a New Price Index Says

Here in early 2018, many observers have expressed worries over the prospects of inflation.

These are recent sample headlines:

  • The coming Trump inflation? -- Washington Post, March 4, 2018
  • Inflation threat could significantly slow bull market, Citi's [chief U.S. equity strategist] warns -- CNBC, March 4, 2018

These concerns about inflation are in line with what the October 2017 Elliott Wave Financial Forecast pointed out, namely, financial market participants are not worried about deflation. Here's a chart and excerpt:

Cost of Insuring Against Deflation

According to a September 22 Bloomberg headline,

Traders Have Thrown in the Towel on U.S. Deflation Bets

The article below it is about a new low in inflation swap floor -- derivative contracts that compensate holders if the annual change in the consumer price index slips into negative territory within a year. As the chart above shows, after spiking to a high of more than 0.60 cents in early 2015, the swaps fell to 0.045 cents on September 26 (less than half a cent) -- their lowest level since than May 2011 when "crude oil futures reached $100 per barrel." The halving of oil prices since then is just one of many preconditions to deflation.

Indeed, a new price index that focuses on university students suggests deflation, not inflation. Read this article excerpt from The Standard, a publication of Missouri State University (Feb. 26, 2018):

The Missouri State Economics Club recently calculated the new Consumer Price Index numbers tailored for Missouri State students.

Prices fell from 2016 to 2017 by 1.03 percent, which is good news for MSU students.

The CPI statistic groups together products and services consumers regularly purchase and observes how prices change over time. ...

MSU economics instructor Andres Cantillo said college students buy different things compared to older adults. This is the reason the club calculates a CPI for MSU students.

"You don't buy as much medicine as grandma or grandpa, but you buy more books than grandma or grandpa," Cantillo said.

The club listed 47 products in eight categories on its goods list. Goods ranged from tuition to toothpaste, from broccoli to beer.

The club members gathered information from multiple places to get the most accurate prices. Collecting the data takes about a week, economics instructor and club advisor John Rabon said. Each member is responsible for gathering prices of 10 to 15 items on the list.

You can read the entire article by following the link below: