Key Economic Data Point to Rising Risk of U.S. Deflation

So far, the United States has largely kept the economic demon of deflation at bay.

But the latest data suggest that the U.S. may be inching closer to the deflationary plight of the European Union.

For example, the 5-Year breakeven inflation rate in the U.S. has fallen to 2009 levels.

A January 11 Business Insider article also points out that nonsupervisory employees have seen a sharp decline in wage growth despite a growth in payrolls.

Here's an article excerpt:

Unlike a number of other nations — especially some countries in Europe — the US is currently not dealing with general price declines. However, the risks of such an occurrence have increased materially.

This for example can be seen in the intermediate-term market-based inflation expectations, which have fallen to 2009 levels — when deflation was a serious concern.

One key data point supporting these rising risks came from last Friday’s jobs report. The report showed wage growth falling from a fairly stable level of 2% per annum.

In particular, "production and nonsupervisory employees" saw a sharp decline in wage growth — in spite of robust growth in payrolls

Economists have been expecting the recent strength in US labor markets, including big increases in job openings, to translate into stronger wages. However, just the opposite has taken place.

Now, combine slowing wage growth with global disinflationary pressures and the collapse in energy as well as other commodity prices

Plus, as an additional data point, the PriceStats CPI trend (online-price-based CPI-tracking model) has fallen to 2009 levels.

Putting it all together points to rising risks of deflation in the US.

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