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U.S. CPI Inflation Forecast 2010 Targets a Break Above 3%

Economics / Inflation Jan 19, 2010 - 04:21 PM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleWhilst the United States has experienced real year on year price deflation during 2009 as illustrated by the comparative CPI indices below, however key elements of the in-depth analysis for UK CPI inflation of 27th December 09 can also be applied to U.S. inflation expectations that converge towards 2010 being a year of inflation for both countries with UK inflation to breaking above 3% early 2009 and staying above 3% for most of the year which was confirmed by today's UK Inflation data that showed CPI soar by 1% in one month to rise from 1.9% to 2.9% as the below graph illustrates.


The conclusion and forecast for UK inflation on the basis of the analysis points listed below is for UK Inflation to spike higher early 2010 to above 3% (from 1.9%) and remain above 3% for most of the year only falling to a target of 2.7% by the end of the year.

  • Inflation Forecast 2009
  • The Inflation Mega-trend
  • UK Retail Sales Signal Debt Fuelled Election Consumer Boom
  • M4 Money Supply Adjusted for the Velocity of Money
  • UK Unemployment
  • Debt Fuelled Economic Recovery Heading for Double Dip Recession?
  • Debt and Liabilities
  • UK Interest Rate Being Kept Artificially Low For Bank Profiteering
  • UK House Prices Continue 2010 Government Debt Fuelled Election Bounce
  • UK Producer Prices
  • Stocks Bull Market Signaling Strong Economy
  • British Pound to Wobble Lower During 2010

U.S. CPI Inflation Forecast 2010

I have received a number of email requests to conduct a similar analysis for U.S. inflation, unfortunately I do not have the time to conduct the necessary in depth analysis for the U.S. economy and therefore I can only extrapolate a trend for U.S. inflation by taking account of the comparatively less inflationary pressures in the U.S. than for the U.K. as a consequence of LESS Q.E. in the US and a significantly higher U.S. unemployment rate which translates into greater spare capacity and thus generates the following forecast graph for U.S. Inflation, which despite being probably less accurate than for UK inflation, it does however present a road map trend for U.S. Inflation that suggests:

U.S. CPI Inflation 2010 Forecast to just break above 3% in April / May 2010 and then trend lower into the end of the year to target 2.1%.

This projection is amidst an ongoing inflation / deflation debate in the U.S. that clearly is resolving towards INFLATION during 2010 rather than DEFLATION which my earlier analysis suggested would come to transpire over the coming year (16 Dec 2009 - The Inflation Mega-trend and the Illusion of Price Deflation). Which is basically summed up by the fact that virtually all of the worlds economies are swimming in an ocean of inflation washed over by the occasional waves of Deflation as the below graphs for U.S. and UK CPI Inflation indices illustrate.

Thus it will be interesting to see how perma-deflationists explain away real in your face year on year CPI inflation, though given the strong belief in the myth of deflation, I assume some obscure dataset will be conjured out of thin air to continue to hang onto the deflationary point of view, despite real and persistent inflation over the coming 12 months which is inline with the clear inflation mega-trend. To ensure you receive my full analysis, including my NEW inflation mega-trend ebook due to be completed within a week, ensure you are subscribed to my always free newsletter.

Source : http://www.marketoracle.co.uk/Article16610.html

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market . Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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