Global Inflation Update: Rebound in Core CPI?

Due to popular demand, I’ve decided to come up with another Global Inflation Update with a couple of tables for y’all! Have price levels bottomed out or are we about to see another leg lower?

For the newbies just tuning in, lemme tell you that inflation trends have been a pretty huge deal for forex price action in the past few months, as market watchers are keeping tabs on the impact of the oil price slump on economic performance. You see, falling price levels usually lead consumers to defer spending and this ain’t good for overall growth. In fact, weak inflation and the threat of deflation have even caused some central banks to cut interest rates earlier this year.

Let’s take a look at the latest annual CPI readings from the major economies to figure out whether their central banks are likely to stay dovish or not:

As you can see from the table above, only Canada and the euro zone have printed improvements in their annual inflation reading compared to the previous reporting period. CPI readings in China and the United Kingdom didn’t budge while the rest of the major economies chalked up another dip in headline price levels.

Core inflation readings, which exclude volatile costs of food and energy in the computations, paint a somewhat different picture. A few economies (at least among those that release core CPI readings) posted decent rebounds for the latest reporting period. This suggests that, minus the effect of weaker oil and energy prices, price levels of non-volatile items are starting to pick up.

In particular, the U.S., Canada, and Australia have all seen improvements in their latest core inflation figures. Meanwhile, the U.K., euro zone, and Japan reported weaker core price levels.

In a nutshell, these headline and core CPI trends reveal that lower oil and energy prices are still weighing on overall inflation for the time being. On a more upbeat note, a few green shoots can be seen among those economies reporting a pickup in core inflation levels. Canada has been ahead of the pack, with its core CPI jump from 2.1% to 2.4% suggesting that the BOC’s recent rate cut is having its intended effect.