The global deflationary shock is over… for now

Gavyn Davies, formerly Head of Global Economics at Goldman Sachs and now blogger at the FT says “Assuming that the oil price is now tracing out a bottoming pattern, as US fracking output is rapidly reduced and oil demand begins to rise, the global deflationary shock is over, for now at least. Headline consumer price inflation rates will increase everywhere from the third quarter onwards.” Davies goes on to say that the impact of lower oil prices has been mixed, depending on where you look, “In the eurozone, a sharp rise in consumer spending duly occurred, and there is little more to come. In the US, by contrast, consumers seem to have saved most of their gains from lower energy costs, and these savings may leak into spending in coming months. This probably means that part of the global GDP gains from the energy shock are still to come.” (Source: FT)