G7 inflation rise on track
Simon Ward
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The latest world economic survey conducted by the German Ifo institute suggests that G7 consumer price inflation will firm during 2014.
A post in October reviewed the implications of monetary trends, the Kondratyev cycle, spare capacity measures and house prices for inflation prospects, concluding that a minor upswing was likely in 2014-15. The consensus view, of course, is that inflation will remain low, with risks weighted to the downside.
The chart shows G7 annual CPI inflation and a GDP-weighted average of country price expectations measures from the Ifo survey*. Inflation finished 2013 at 1.4%, down from 1.6% a year before but up from a low of 0.9% in April. The composite expectations measure moved significantly higher in late 2013 and remained elevated in the first quarter, consistent with a near-term inflation uptick.
Commodity prices have firmed a little recently – the CRB futures index is currently 4% above its fourth-quarter average – but core pressures may also contribute to an inflation rise. The second chart, an update from the earlier post, shows that house prices have led core inflation in recent years and suggest an increase through early 2015.
*The survey polls “economic experts of multinational firms and institutions”. The survey results are constructed to equal five when the numbers of positive and negative responses are the same.
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Reader Comments (1)
Kondratieff cycle?!? Murray Rothbard did a funny refutation of it. Only time you have written something I disagree with.