CPI downside surprise

Well, well, well, that was certainly a surprise. The wizards in Washington that put together the Consumer Price Index say prices were flat in November vs. October. The "core" CPI, which excludes food and energy, was also unchanged. Both readings were below forecasts for 0.2% gains. Price declines were widespread in vehicles (-0.8%) gasoline (-1.6%), education and communication (-0.2%), tobacco (-0.3%) and commodities (-0.4%). The year-over-year change in core CPI is still elevated at 2.6%, but down from the September peak at 2.9%.

Now, I have a hard time believing that real world prices are declining to this extent. I don't see it in my everyday life. But hey, the gubmint says they're dropping and that's all that matters to the market. Bonds are up in price, down in yield, while the dollar index is giving up some of its recent short-term gains.