Tags: Economists | deflation | coming | United States

Economists Warn WSJ: Deflation Will Haunt in Wake of Oil Plunge

By    |   Sunday, 18 January 2015 12:47 AM

Markets have been full of talk about deflation in Europe and Japan recently, but now the concern is spreading to the United States as oil prices plunge.

The trend may already have begun, with the government reporting Friday that consumer prices fell 0.4 percent in December, the biggest drop in six years.

That put the gain for all of 2014 at just 0.8 percent, the smallest 12-month advance since October 2009.

The Wall Street Journal's survey of 66 economists produced an average forecast for only 0.5 percent consumer-price inflation in the 12 months through June, with 25 percent of the economists expecting deflation during that period — as much as 1 percent deflation. (Editor's Note:  Deflation is a decrease in the general price level of goods and services and occurs when the inflation rate falls below 0 percent, or a negative inflation rate).

Low or negative inflation won't hurt the economy, according to the survey.

The economists forecast GDP will expand 3 percent this year, accelerating from the 2.6 percent forecast for this year.

"The plunge in energy prices provides big dividends to consumers and businesses," Bernard Baumohl of the Economic Outlook Group told The Journal.

But some economists expressed concern after the December consumer price data were released Friday.

"This is a number that consumers will love, but economists will worry about," Russell Price, senior economist at Ameriprise Financial, told Bloomberg.

Economists' concern centers on the health of the energy industry.

But as sliding commodity prices "filter through the system, it should take nine months to a year, then we should start to see inflation in the U.S. and around the world start to pick back up," Price said.

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Markets have been full of talk about deflation in Europe and Japan recently, but now the concern is spreading to the United States as oil prices plunge.
Economists, deflation, coming, United States
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2015-47-18
Sunday, 18 January 2015 12:47 AM
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