Inflationary o deflationary? What is the effect of SARS-Cov2 on price and wage dynamics? There are those who fear that the scarcity of some goods, due to disruptions in value chains, raise their price and thus cause inflation. But the truth is the opposite: there will be one resurgence of deflation. As also recognized by the FED Chairman, Jerome Powell.
For four reasons. First, the fall in demand pushed i commodity prices, starting with the undisputed king: the Petroleum it's down 65% since the beginning of the year. Also because Czar Putin has decided to unleash a war against the USA with new weapons: by lowering the cost of crude oil below the break-even threshold of shale-oil extraction. And Saudi Arabia does not think it is true that it has found the ally that was missing in 2014-15. Let's see who will win, but the immediate effect is once again to push the column that measures the inflationary temperature below zero.
Second reason: the rarefaction of consumption forces companies to lower the price lists to encourage purchases. Third, lower production leaves many workers out and about scale back wage demands.
Fourth, theincreased competition due to the greater use of purchases over the internet. Instead of going to crowded malls and supermarkets, many people prefer to shop online. Where the transparency and comparability of prices are greater. This reorientation of purchases towards the network is unlikely to reverse once the epidemic has passed. In other words, the virus is accelerating the transition to new sales channels where competition is more radical.
In other words, the virus killed an already dead inflation.
