Deflation is the name of the game | US Retail sales up but not as much as expected – industrial production down

The chart above, for which we are indebted to www.investinganswers.com, shows the logic behind the fears of central bankers in the developed world at present. In nearly all jurisdictions – the US, UK, Eurozone, Japan, even Australia and New Zealand, low or negative inflation is the order of the day. The driver of this phenomenon has been, and continues to be, the fall in oil prices. Light, Sweet Crude for October delivery seems to have stabilised in the very short term around the $45 mark but there is no guarantee that this will be sustained, as there is a glut of oil on world markets and sources of supply are, if anything, increasing, particularly with the prospect of Iranian oil coming on stream.

Later today we will have the latest Consumer Price Index (CPI) figures for the USA. Expectations are for headline inflation to show little or no growth, while core inflation, or the CPI ex food and energy, is expected to be 1.9% on a year-by-year basis.

US Retail sales up but not as much as expected – industrial production down

The US Retail Sales figures, released yesterday, showed some growth, but at 0.1% not as much as expected (0.2%). Nevertheless, this is the sixth month in a row that a positive outcome has materialised. Industrial Production, the report on which is released by the Federal Reserve and which measures the output of manufacturing in the USA, was down, and down more than expected ( -0.4% as against -0.2% expected, and a positive 0.6% previously).

It seems that if you are a member of the Federal Open Market Committee (FOMC), which begins what could be a very significant two-day meeting later today, you ‘pays your money and you takes your choice’.