World CPI Still Sputtering Around 1 Percent by Eric Bush, CFA
Our basic world CPI proxy, which takes the average year-over-year change in the CPI of 33 countries, was just 1.14% as of 7/31/2016. It has now been more than a year and half since our world CPI proxy registered a year-over-year change of 1.4% or more. This series has been unusually range bound (1.06%-1.31%) since the beginning of 2015. It is increasingly difficult to predict where this series is heading. Recent moves in commodity prices (oil and gold, specifically), would suggest global inflationary pressures are increasing. The improvement in the Citi Inflation Surprised Index would also point towards higher CPI figures globally. On the other hand, however, deflationary forces out of China (currency depreciation and contraction in FX reserves) as well as the performance of stocks relative to the performance of long bonds (bonds outperforming stocks) would seems to advocate for less global inflation. Perhaps given the countervailing forces in the global macro environment the world CPI proxy will just continue to sputter on at around a 1% year-over-year rate.