Haver Resources
Mar 17

Viewpoints: Tracking Stagflation

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How do we know if the world economy is confronting a stagflation scenario? Persistent negative growth surprises combined with persistent positive inflation surprises is one answer. Defined in this way, the recent evolution of Citigroup’s growth and inflation surprise indices suggest we are close to – or even in the midst of – such a scenario at present (see figure above).

How long this stagflation scenario will endure is more difficult to fathom. The behaviour of commodity prices and inflation surprises will probably hold the key for the near-term (see figure below). How policymakers subsequently respond and how other fundamental factors behave (e.g. labour markets and productivity growth) will be more important for the medium-term.

 

Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.

About The Author

Haver Analytics is pleased to bring Andrew Cates's commentaries on the state of the global economy to its clients.

Andy Cates has more than 25 years of experience forecasting the global economic outlook and in assessing the implications for policy settings and financial markets. He has held various senior positions in London in a number of Investment Banks including as Head of Developed Markets Economics at Nomura and as Chief Eurozone Economist at RBS. These followed a spell of 21 years as Senior International Economist at UBS, 5 of which were spent in Singapore. Prior to his time in financial services Andy was a UK economist at HM Treasury in London holding positions in the domestic forecasting and macroeconomic modelling units.

He has a BA in Economics from the University of York and an MSc in Economics and Econometrics from the University of Southampton.