Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral?

Economics / Inflation Feb 28, 2017 - 08:34 PM GMT

By: Nadeem_Walayat

Economics

Whilst in Britain, inflation focus is on the surge in prices following the BrExit vote that triggered a 20% drop in sterling which is slowly but steadily feeding its way through the supply chain and heralds a nightmare 2017 for already distressed retailers such as Tesco, Britain's biggest retailer that is literally facing a crisis which I have been covering in a series of videos the latest of which follows a BBC investigation into its 'fake' shelf prices duping customers into buying products at expired offer prices.


The implications of sterling's sharp drop are obviously inflationary and resulting in an increase the price of imports and therefore has been exerting upwards pressure on shop prices as suppliers restock at the lower sterling exchange rate. The most recent inflation data for January 2017 has RPI rising to 2.6% from 1.4% before Brexit and CPI at 1.8% against pre-Brexit CPI 0.6%. Whilst factory gate price inflation have risen to 3.5%.

However what's worse is that Britain's inflation trend goes beyond the temporary Brexit factor and is becoming subject to an global inflation surge as a consequences of 8 years of central bank zero interest rates and rampant money printing as the US CPI inflation graph illustrates.

US CPI jumped sharply higher to 2.5% up from 1.7% the month before. Given the sharp trend trajectory of the US CPI inflation one would wonder if it was the US that had voted for Brexit triggering a 20% drop in the Dollar rather than Brexit sending sterling plunging.

Similarly Germany the bastion of price stability is also witnessing the early signs of an surge in inflation, rising to its highest level for 3 years at 1.7%, with the economic basket cases such as Spain not far behind on 1.4%, that collectively have sent euro-zone inflation soaring to 1.8% up from 1.1% the month before, which is a far cry from the deflation expectations of economies that have remained in economic stagnation, even depression for the past 6 years.

Meanwhile the euro-zone nation that has suffered the most from being tied to the German Economic Empire, Greece, whilst continuing to have a shrinking economy i.e. likely to experience a further contraction of about 1% for 2017, an economy some 25% smaller than where it was 7 years ago whilst at the same time having been loaded with an additional $400 billion bailout debt burden that ensures Greece remains permanently bankrupt. Nevertheless Greece is also witnessing a surge in inflation to 1.5% up from 0.3% the month before. Which illustrates that regardless of the fundamentals of domestic economies, the euro-zone nations are all tied to Germany, so if Germany experiences sharply rising prices then so will the whole euro-zone.

The big question mark is the surge in global inflation temporary or are we about to finally see runaway inflation as a consequence of the world central banks collectively having conjured some $20 trillion out of thin air and printed about $100 trillion in additional debt to save the bankrupt banking crime syndicate. Rampant money printing that asset prices such as housing and stocks have already greatly leveraged themselves to in the mother of all bull markets.

Well definitely there is at least some seepage coming out of the banking / asset price system towards feeding the wage (including in work benefits) price spiral, the consequences of which will be for the further loss of purchasing power of savings / bond investments and earnings. Whilst continuing to inflate the price of assets that cannot be easily printed such as housing.

Which implies to expect a far higher and sustained spike in UK inflation during 2017 as the temporary Brexit inflation becomes absorbed into a global surge in inflation the real world consequences will be one of a 10% hike in UK food prices during 2017 that will have a severe impact on consumers who are already facing energy price hikes of as much as 14% from the likes of NPower with the City Councils warning of 10%+ council tax hikes to cover the shortfalls in central government funding, all of which is leading towards a perfect storm for the retail sector triggering job losses and store closures.

Therefore the key indicator to watch for the inflation mega-trend driver for 2017 is wage inflation that I suspect WILL rise that would sow the seeds for UK interest rate hikes during 2017, for the one thing that central banks fear the most is triggering the wage price spiral.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2017 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 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 focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 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.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

R.E.B
01 Mar 17, 21:10
Where is my deflation?

But, But, what happened to the deflationary collapse? The stock market should have been wiped out by now, gold should be £300 an ounce and I should be able to buy a car for a sack of potatoes a la 1932!!! Did I miss something?


Nadeem_Walayat
02 Mar 17, 17:29
Inflation

There hasn't been any deflation, apart from a month or two.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules