Deflation Revisited

Generali

http://ftalphaville.ft.com/blog/2009/09/30/74756/dont-fear-the-inflation-goldman-says/

What a Goldman Sachs analyst thinks about deflation etc.

halight

Generali Do you think we will have deflation in the UK over the next next few months/years ?

Really2

I think shorterm deflation, mid to end of next year then very sluggish inflation (sub 1%) for another year or more.

Or at least a 1-5 years of very low inflation at best. There is still a lot of debt and spare capacity out there, not just here everywhere.

jim83

In the sense of falling prices, I don't see deflation in the near term for the UK.

According to official CPI numbers, prices have risen 2.5% between January and August - an annualised rate of 4.3%.

If prices continue to increase at the same rate they have been so far this year, the next 3 quarters will look like this (I have overlaid the graph on top of the BOE's CPI prediction)



Of course, it's massively unlikely that the rate of change in prices will remain constant, and credit contractions are by definition deflationary, but it is my firm belief that the powers that be are severely understating the risk of inflation. CPI numbers significantly higher than expected could shock the bond markets, causing sterling to fall off a cliff.


... but that's just my opinion and I'm no soothsayer.

halight

At the start of the year i thourt that there would be quite a lot of job loss in retail as there seems to be a high level of spare capacity among the big stores with in 10 miles of were i live there are 9 tesco stores plus over supermekrts

And threre are 6 big retail parks pluss many many high streets.

Now a lot of the smaller shops have let people go and small have shut down alltogether.
Some of the weak big stores have gone under to
but very little job loss or closers among the others

Just my way of thinling which very well may be worong but we really dont need this many big shops that all seem the same?

Really2

jim83 wrote: »

I

We are at 1.6% at the moment where is the upswing data coming from?

Jonbvn

Really2 wrote: »

I think shorterm deflation, mid to end of next year then very sluggish inflation (sub 1%) for another year or more.

Or at least a 1-5 years of very low inflation at best. There is still a lot of debt and spare capacity out there, not just here everywhere.

Which probably translates into low interest rates, for the foreseeable?

Really2

Jonbvn wrote: »

Which probably translates into low interest rates, for the foreseeable?

Indeed.:cool:(well for some)

Jonbvn

Really2 wrote: »

Indeed.:cool:(well for some)

It is good news for me personally, but I don't brag about it, unless I'm drunk;)

Really2

Jonbvn wrote: »

It is good news for me personally, but I don't brag about it, unless I'm drunk;)

Early doors today (it is for me also, if I thought inflation I would be jumping ship but no need to panic as far as I can see at the moment.)

jim83

Really2 wrote: »

We are at 1.6% at the moment where is the upswing data coming from?

Current CPI figures still include the largest deleveraging event of all time late last year. I have taken numbers from monthly CPI data (here) and am using January 2009 onwards to form the trend.

Prices have been rising consistently this year. This is most evident in RPIX, which is @ 5.1% when annualised.