Deflationary spiral is an illusion for now

Please see below the latest ‘Chart of the Week’ from State Street Global Markets

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This week, Michael Metcalfe, global head of Macro Strategy at State Street Global Markets discusses the return of headline deflation.

 

“Our PriceStats* series recorded the largest ever decline in US prices for the month of April, with significant falls in transportation and clothing prices. Whilst not all prices are collapsing, it was enough to send the annual rate of inflation back into negative territory for the first time in four years. The robust readings in food prices may still reflect shortages and stock piling, but the rising prices in household equipment, recreation and leisure goods suggest deflation has not yet become broadly entrenched. With this in mind, despite deflation returning to the headlines, the risks of a deflationary spiral are more illusory than real at this moment in time.”



*About State Street PriceStats®

PriceStats is a provider of high-frequency global inflation indices and purchasing power parities that offer insights into key macroeconomic variables. The indices are generated using software that scans the underlying code on public websites to capture the full array of products sold by online retailers, including food, beverages, electronics, apparel, furniture, household products, prescription drugs, and over-the-counter medicines. The technology monitors price fluctuations on roughly five million items sold by hundreds of online retailers in more than 70 countries. The PriceStats methodology is grounded in the extensive body of research of MIT professors Alberto Cavallo and Roberto Rigobon and their Billion Prices Project at MIT. Cavallo and Rigobon have leveraged this research and their expertise in monetary economics to develop the PriceStats indices.

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