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Unlike a number of countries in Europe the U.S. is currently not dealing with general
price declines but, that being said, the risks of such an occurrence have increased materially. Below are a number of such deflationary risks and how they might impact the U.S. economy.
By Sober Look (soberlook.com) from an article originally posted* under the title Rising deflationary risks in the United States.
(Sober Look is a no-hype financial blog that relies on data analysis and primary sources. Posts are intended to be succinct, to the point, with no self-promoting nonsense, and no long-winded opinions. If you are looking for Armageddon predictions or conspiracy theories, you will be thoroughly disappointed. Topics include U.S. and global economic developments and financial markets. Sign up for their daily newsletter.)
[Below are a number of such deflationary risks and how they might impact the U.S. economy:]
1. The intermediate-term market-based inflation expectations have fallen to 2009 levels – when deflation was a serious concern.
2. Wage growth is falling from a fairly stable level of 2% per annum.
3. In particular, “production and nonsupervisory employees” saw a sharp decline in wage growth – in spite of robust growth in payrolls.
4. Economists have been expecting the recent strength in U.S. labor markets, including big increases in job openings, to translate into stronger wages but just the opposite has taken place in combination with…with global disinflationary pressures and the collapse in energy as well as other commodity prices… Below is the CRB commodity index.
5. [In addition]…the PriceStats CPI trend (online-price-based CPI-tracking model) has fallen to 2009 levels.
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| Blue = actual CPI, orange = PriceStats index (h/t @jp_koning) |
…[While] some Fed officials are quite open about taking 2015 rate hikes off the table, the markets still anticipate the first hike in late Q3/early Q4 of this year which is somewhat surprising considering that in the U.K., for example, rate hike expectations have been shifted to 2016.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original source: http://soberlook.com/2015/01/rising-deflationary-risks-in-united.html?
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4. Will Higher Interest Rates Result From Additional Tapering?
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6. Interest Rates NOT Rising Any Time Soon – Even With Fed Tapering. Here’s Why
Everyone and their mom is expecting long-term interest rates to rise now that the Fed is tapering its bond buying programs. I have a couple of problems with this line of thinking because, although it seems like reducing demand for a security (i.e. tapering QE) would result in a drop in price, when you really think about how quantitative easing works this makes no sense and, secondly, the market is telling us this makes no sense. Let me explain. Read More »
7. We’re Headed for Crippling Deflation First & Then Rampant Inflation – Here’s Why
Are we headed for rampant inflation or crippling deflation? I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. [Let me explain why I think that will unfold.] Words: 1025 Charts: 3 Read More »