Double-Digit Imported Deflation

By Lakshman Achuthan

Six years ago – the last time global import price deflation was this intense – the worst global recession in decades was ending. A key question today is whether recession risks have mounted in the U.S. or any other major economy.

Earlier this year, year-over-year (yoy) world import volume growth dropped to its lowest readings since 2009. Today, it remains in a decisive downturn and near May’s five-and a-half-year low, a far cry from the surge that followed the global recession. Clearly, after years of extraordinary policy stimulus around the globe – aimed at pulling demand forward from the future – world trade growth has collapsed.

Even worse is the nosedive in yoy import price growth, which has been exhibiting double-digit deflation since the beginning of the year (bottom line). Indeed, the only other time on record the world has seen such intense import price deflation was during the global recession.

Certainly, the fall in crude oil prices has played a role more recently. But the world import price level peaked in April 2011, and dropped by 18% over the next four years. So this is not just about the plunge in oil prices over the past year or so.

In fact, in the U.S., yoy growth in import prices excluding petroleum has been in negative territory since the end of last year, and is now near readings not seen since the fall of 2009 (not shown).

The deflationary plunge shown in the chart is mirrored in every region – the U.S., Japan, the Eurozone, Central and Eastern Europe, Emerging Asia, Latin America, and Africa and Middle East – not only for import volume growth, but also for import price growth. Analogous patterns are also evident in the growth rates of the volumes and

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