Oil price plunge pushes US into deflation

Oil price plunge pushes US into deflation

The US entered deflation in January for the first time since the financial crisis as prices were dragged down by the plummeting cost of oil.

On an annual basis, the US consumer price index (CPI) fell by 0.1 per cent as prices fell by 0.7 per cent between December and January.

Energy prices fell by 19.6 per cent on an annual basis thanks mainly to the halving of the price of a barrel of oil in the past six months.

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If energy and food prices are excluded from the calculation, which economists generally do to calculate ‘core’ inflation, US goods prices actually rose by 1.6 per cent.

The US has joined the eurozone, which had already fallen into deflation, while the UK is widely expected to enter deflation in either February or March.