{"id":16509,"date":"2018-01-14T13:45:41","date_gmt":"2018-01-14T17:45:41","guid":{"rendered":"http:\/\/www.pgmcapital.com\/?p=16509"},"modified":"2018-01-14T13:50:14","modified_gmt":"2018-01-14T17:50:14","slug":"will-inflation-rise-globally-in-2018","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/will-inflation-rise-globally-in-2018\/","title":{"rendered":"Will Inflation Rise Globally in 2018?"},"content":{"rendered":"

Dear PGM Blog reader,<\/p>\n

In this weekend blog article, we want to take the opportunity to discuss the latest figures regarding the rise of the global inflation figures and the best way to hedge against it.<\/p>\n

INTRODUCTION:<\/h3>\n

In economics,\u00a0inflation<\/b>\u00a0is a sustained increase in the general\u00a0price level\u00a0of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the\u00a0purchasing power\u00a0per unit of money.<\/p>\n

INFLATION CPI:<\/h3>\n

Inflation measured by consumer price index (CPI) is defined as the change in the prices of a basket of goods and services that are typically purchased by specific groups of households.<\/p>\n

A consumer price index is estimated as a series of summary measures of the period-to-period proportional change in the prices of a fixed set of consumer goods and services of constant quantity and characteristics, acquired, used or paid for by the reference population.<\/p>\n

Below chart from OECD shows the total annual CPI in the period from January 2017 up to December 2017, per OECD country.<\/p>\n

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CORE INFLATION:<\/h3>\n

Core inflation<\/b>\u00a0represents the long run trend in the price level. In measuring long run\u00a0inflation, transitory price changes should be excluded. One way of accomplishing this is by excluding items frequently subject to volatile prices, like food and energy.<\/p>\n

PRODUCER PRICE INDICES (PPI):<\/h3>\n

Producer price indices (PPI) measure the rate of change in prices of products sold as they leave the producer, they exclude any taxes, transport and trade margins that the purchaser may have to pay.<\/p>\n

The PPI measure\u00a0price change\u00a0from the perspective of the seller and differs from other indexes, such as the\u00a0Consumer Price Index, that measure price change from the purchaser’s perspective.<\/p>\n

The PPI looks at three areas of production: industry-based, commodity-based and commodity-based final demand-intermediate demand.<\/p>\n

Below chart from OECD shows the total annual PPI in the period from January 2011 up to December 2017, per OECD country.\"\"<\/a><\/p>\n

USA CPI REPORT JANUARY 12, 2018:<\/h3>\n

On Friday, January 12, the USA Bureau of Labor Statistics<\/a>, reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in December 2017 on a seasonally adjusted basis.<\/p>\n

Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.<\/p>\n

The index for all items less food and energy increased 0.3 percent in December, its largest increase since January 2017.<\/p>\n

The food index rose 1.6 percent over the past year; the index for energy increased 6.9 percent, with all of its major component indexes rising during 2017.<\/p>\n

Below chart shows a breakdown of the inflation figures in the USA in 2017.<\/p>\n

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PGM CAPITAL ANALYSIS & COMMENTS:<\/h3>\n

Inflation Forecast:<\/h4>\n

Inflation forecast is measured in terms of the consumer price index (CPI) or harmonized index of consumer prices (HICP) for euro area countries.<\/p>\n

Below chart shows the Inflation forecast for 2018 by OECD. Projections are based on an assessment of the economic climate in individual countries and the world economy, using a combination of model-based analyses and expert judgement.<\/p>\n

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In below video,\u00a0Mihir Worah, CIO Asset Allocation and Real Return, explains the micro and macro factors underpinning PIMCO\u2019s inflation forecast along with implications for investors.<\/p>\n