Once again the MIP got the direction right but it understated the magnitude of the decline.  But you can't blame the MIP too much this is the largest monthly decline since the Great Depression.

Last month the BLS and the news media reported the -1.01% monthly decline as largest decline since the Bureau of Labor Statistics began tracking seasonal adjustments in 1947.  But that is on a "Seasonally adjusted basis".  On an actual basis it was the largest since 1950.  This month's  -1.97% decline is greater than all monthly declines including the February 1933  decline of -1.55% . Making it  the largest since January 1933 (in the Great Depression) when it declined -5.84% in a single month.

Check out the monthly inflation rates since 1914.

Note:  This month we have added a blue shaded (under water) region to the MIP to indicate deflation. 

At this point the MIP is projecting more decreases through mid-year but that doesn't take into consideration FED action which could boost inflation rates earlier.  In addition. the bailouts could radically skew the inflation rate towards the end of next year.  Making hyperinflation a possibility even though due to the nature of the MIP it does not take Bailouts into consideration.

Robert Prechter of the Elliotwave Theorist is forecasting the possibility of deflation. To read his free report on on Why we are headed for Deflation Click Here.

Also See Elliotwave article Do You Know how to Preserve Your Wealth? for more information on investing for safety.

Tim McMahon, Editor
Financial Trend Forecaster