Deflation these days comes disguised as cupcakes covered with icing, succulent lobster drenched in butter, and old cars clanking down the highway. How so, you may ask.
Let's take a look at the routine of daily life to see what we find, starting first with a childhood treat: the cupcake. Headline from MarketWatch on May 16: "Cupcakes are deflating according to April’s CPI data." A University of Michigan economics professor "pointed out on Twitter that the index for 'fresh cakes and cupcakes' declined 0.8% from the previous year and from the previous month."
Yes, the data is from April, but this morsel of deflation evidence was too delicious to withhold, even several months later.
Still on the subject of food, lobster has had a much steeper price decline. An August 7 Financial Times piece reports: "The Maine lobster industry is being crippled by a glut of supply … sending the price per pound plummeting. … But demand for what has been long considered a luxury dish has not kept pace, especially since the global recession hit in 2008."
Maybe one reason why seafood lovers are not driving to restaurants to take advantage of cheaper lobster is that they have to budget money for car maintenance. In another sign of deflation, car owners are keeping their vehicles longer instead of splurging on a new one.
"Average U.S. car is 11.4 years old, a record high," reads an August 6 CNNMoney headline.
During this summer, store shoppers have also been seeing signs of deflation. "A group of large US retailers reported higher sales for July, but had to resort to bargains to lure shoppers," says an August 8 CNBC report.
You can find other signs of deflation, from the micro-level to the macro-level, if you know where to look. What's important to know is that the economy is in the early stages of a major deflationary trend.
Deflation is rare. The last time deflation occurred was 1929-1932, and it devastated the economy.