Read the Fine Print of CPI Report
But how could there be a commodity price deflation in the CPI while commodity price indexes show sharp increases? The Economist's commodity price index for example show a 30% increase over the latest year.
This inconsistency, to be sure, is mostly due to the fact that what the CPI report labels "commodities" is finished goods, whereas the commodity price indexes track prices of raw materials. But it is also due to the fact that the Bureau of Labor Statistics uses arbitrary measures of "hedonic adjustments". More specifically, the primary reason why goods prices fell so much was that the introduction of 2007 car models (which the BLS statisticians on unspecified grounds have deemed to be of much higher quality) continued this month.
CPI reports during coming months will apparently also be depressed by this arbitrary "hedonic adjustment". This will likely fool most people that "inflation is low". But the truth is very different.