U.S. Outlook: U.S. deflation not the end of the world
A further look into causes and transmission mechanisms may help.
For a detailed look at this and other developments, see my full weekly analysis. Highlights are outlined below, followed by a link to the full U.S. Outlook report, delivered on Feb. 6.Key observations:
- The U.S. deflationary pressures are mainly coming for only a handful of sectors: energy, transportation, and apparel.
- Central bankers and economic textbooks have sounded warnings about deflation’s potential dampening effects on aggregate demand.
- It’s important to remember that the U.S. labor market is in a far different place right now than Europe’s.
- The evidence garnered so far suggests U.S. consumers and businesses are behaving just as we would expect.