Price Signals of Global Slack

March 14th, 2014
in econ_news

by Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI

Some key economies, including the U.S., have been enjoying increased export growth by certain measures. Yet, as discussed in ECRI’s U.S. Cyclical Outlook in January, “the U.S. is able to boost exports only by cutting prices, because exporters simply lack pricing power”.

Follow up:

In fact, year-over-year growth in world trade prices remains in a cyclical downturn, and dropped deeper into negative territory, hitting an eight-month low in December. Indeed, this measure has exhibited almost continuous price deflation since early 2012, barring a couple of abortive forays into positive territory.

As the chart shows, this measure has rarely been so consistently negative, the last occasion being in the wake of the Global Financial Crisis. Before that, it had turned negative around the 2001 U.S. recession.

The other extended period of deflation seen in this measure was for nearly four years in the late 1990s, when a massive once-in-a-lifetime deflationary shock resulted from the integration of China, India, and the ex-Soviet economies into the global economy. This period also included the Asian crisis.

Today, there is no such crisis or structural deflationary shock comparable to that experienced in the late 1990s. Thus, the mounting deflation in world trade prices is signaling growing slack in the global economy.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved