Threat of deflation remains low in the US – SocGen

By FXStreet Brian Jones, Research Analyst at Societe Generale, suggests that the recent financial-market turbulence, along with a near halting of real business activity during the final quarter of 2015, has heightened concern about the probability of a recession in the US.

Key Quotes

“Our analysis of a variety of barometers indicates that while not zero, the probability of such an occurrence remains quite low.

Our overall and core CPI forecasts do not call for a period of deflation over the next two years. Another way to assess the possibility of such an event is to consider the detailed composition of our projections. Not only do we expect year-to-year increases in the overall and core CPIs to climb, but we also expect a marked reduction in the percentage of items experiencing declines. From nearly 40% currently, the percentage of components in the overall CPI posting 12-month declines probably will recede to almost 10% by the end of 2017. Excluding volatile food and energy items, the proportion of components falling probably will be pared in half to approximately 15%.”
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Source:: FX Street