“Basically this is one disinflationary shock». Jerome Powell, the President of the FED, did not send her to say, even if with his easy-going manner that makes him very empathetic; a dowry for which there is great hunger in these tragic moments.
In the last post-committee press conference (both strictly virtual) of the powerful US central bank, he argued: «I know there is a lot of debate about whether all this can lead to inflation over time, but what we see in the world they are disinflationary pressures and now there has been a demand shock and inflation core it fell to 1%. And I am convinced that for a long time we will have to fight against these disinflationary pressures rather than against inflationary pressures».
The Lancets they can only subscribe, since they have argued the same thesis several times. Rather it is interesting that you use the term disinflationary rather than deflationary that, when price momentum is close to zero, as it currently is, would have been more appropriate. We think it was not a "slipping of the tongue" to avoid hitting where the tooth hurts, but a choice not to evoke the much more fearsome and feared ghost of the present and prospective decline in prices.
Weakness of final question, innovation technology that increases the productivity of capital (machines that learn from machines how to be more efficient: stuff like Asimov or brothers, then become sisters, Wachowski), huge production capacity unused and increased competition, thanks to new ways of trading goods via the internet and by now more and more services (of all kinds and species), are inexorably pushing prices down.
And once again they send to the attic, like a rusty old iron, the quantity theory of money, which made the fortune of many economists in the past. A theory too simple (more money = higher prices; ergo: greater increase in the money supply = greater price dynamics) to account for the changing complexities of the real world. Thankfully even central bankers have quitfrom timeto follow her as the North Star.
Convinced of this, and of the fact that money too, to be produced in large quantities, must be demanded in large quantities, we observe that in July, for the first time since the pandemic crisis began, companies have increased their price lists a little. This is stated by the prices component of the output of the global PMI, both in services and in manufactured goods.
But the input price component says that costs have risen even more. Above all because, with the return to work, employee salaries once again weigh on company budgets (in the suspension phase, the states had taken charge of it). So businesses suffer a margin compression, which is another indicator of deflationary pressures.
In any case, the increase in the price lists is very little, given that the indices of producer prices of goods and services continue to record declines. For example, -0,2% in the US in June over May.
More generally, it should be remembered that PMIs and their components are diffusion indicators, which measure how common (widespread) a phenomenon is, and not the extent of the phenomenon itself. Clearly, just as ten violins in an orchestra emit a more powerful sound than just one, if several companies adopt the same price policy, the result will be a greater variation in one direction and the other.
I consumer prices, which incorporate all markups at all stages of the value chains, are maintained sotto at e away from fateful threshold of 2% that the central bankers have assumed as a symmetrical target.
Prices of raw material, on the other hand, are on the rise significantly. A thermometer of the progress of the economy on the road to recovery. Although, in the case of the queen raw material, the Petroleum, the quotation is still well below the levels of the end of 2019, and despite the drastic cuts in supply.
The latter is the relevant piece of information: it exists too much supply of goods (also of work) with respect to the demand. And the prices can only be set by the buyer, therefore lower rather than higher.
As happens in certain markets where fresh foodstuffs are auctioned (such as the fish market in Goro, in the Po Delta), where the auctioneer (Walras would have liked it), for each lot, starts from a high price and starts a count down, until someone raises their hand to indicate that it's down enough for them and they're willing to buy it.
In monitoring inflation hope for the best and plan for the worst. Where is the best it would be some real and lasting price increase.
