CPI data came out this morning and verified what I have long believed – despite some rising input costs in the PPI corporations are simply unable to pass these costs along to the consumer. The government’s CPI data came in at an anemic year over year rate of 1.1% – WELL below the historical average of 3.5%. Nonetheless, I think the government data can be a bit misleading as the housing component does not properly reflect the true rate of inflation. While the government’s use of Owners Equivalent Rent has likely overstated inflation over the last few years it has likely understated the rate of inflation over the last decade. My latest reading shows that the CPI data continues to understate the true rate of inflation, however, at 2.1% we are still below the long-term historical average leaving us in a state of disinflation with what I believe is a higher risk of deflation than hyperinflation.