Stagflation Scare? We do not think so! Not yet…
The continuing move in energy prices poses a clear threat to growth because of the impact on consumers’ real incomes. Here the risk remains of a stagflation scare of a type not seen since the 1980s. Governments will be eager to try to shield consumers from the worst impact. The consensus bias is for inflation forecasts to be revised up and growth to be revised down at the moment. But we’re still a long way from something that resembles stagflation. There is no technical definition for deflation, but DB economists use the parameters at real GDP growth of less than 1% and inflation of more than 3%.
In the “big picture,” the world is looking at the collateral damage to economic growth and households’ real incomes caused by the ambitious energy transition. We expect more growth downgrades and more inflation upgrades going forward. Overall, we are concerned that the global economy and markets are moving in a more worrying direction of higher interest rates, higher inflation, unsustainable amount of debt, and rising volatility.
In the “big picture,” the world is looking at the collateral damage to economic growth and households’ real incomes caused by the ambitious energy transition. We expect more growth downgrades and more inflation upgrades going forward. Overall, we are concerned that the global economy and markets are moving in a more worrying direction of higher interest rates, higher inflation, unsustainable amount of debt, and rising volatility.
