Zero deflation (though CPI could go negative)
- Inflation from the Anglo-Saxon economies of the world hits the global stage today, in the form of consumer prices. Deflation is a zero possibility - as deflation is a general decline in prices and most prices are rising in the UK and in the US. There is an outside chance of negative CPI, but that would be a relative price shift.
- The difference between deflation and a relative price shift is not semantic; the distinction is a significant issue that generates different economic behaviour. Anglo Saxon central banks regard lower prices as being stimulatory for their economies.
- Euro area business sentiment data in the form of PMI numbers are scheduled for release, and should be treated with the caution they deserve (despite PMI data repeatedly reporting that French manufacturing is collapsing, it has expanded, for instance). The numbers should, however, signal economic expansion.
- China's unofficial PMI data did not signal expansion and to that extent has generated a certain amount of concern in financial markets. The weakness in export orders may reflect weaker export orders, or may just reflect the impact of a weaker Euro on the value of export orders.