Global inflation outlook 2013

Global inflation outlook 2013

Azusa Kato,David Tinsley,Dominique Barbet,Gizem Kara,Jacqueline Rong,Jeremy Lawson,Marcelo Carvalho,Ryutaro Kono,Xingdong Chen - Market Economics
Economic Desknote Global | 14 Dec 2012 12:52 |

Summary

Global Outlook

We expect global inflation in 2013 to remain broadly unchanged from 2012, at around 3½%. Inflation rates will vary between regions and countries, though. Although inflation should remain stable around 2% in the higher-income economies, emerging and developing economies are likely to see inflation edge up slightly, to 5.4% from 5.2% in 2012. Among the advanced economies, US inflation is likely to remain broadly stable at around 2% in 2013, while in the eurozone, we expect inflation to slow to 1.6% in 2013 from 2.5% in 2012. Among the major emerging economies, Asia ex-Japan and Latin America should see inflation inch up next year. Most notably, our forecast for Brazil suggests that inflation is likely to be much more of a headache than people think.

Regional outlook

Eurozone

With the core eurozone countries now following the periphery in terms of economic weakness, less reliance on indirect tax rises and lower energy price forecasts, the upward trend in inflation last year should reverse in 2013.

France

The recent slowdown in core inflation on the back of wage moderation should persist in 2013, bringing French headline CPI inflation down by about 0.5pp from 2.0% in 2012.

US

US consumer price inflation is set to follow broadly the same patterns as it did in 2012. Headline inflation will continue to oscillate with commodity prices, while core inflation should remain close to the Fed's 2% target.

UK

UK consumer price inflation is ending 2012 lower than where it started the year, but the drop has not been as much as expected. It should fall further in 2013, however, due to weak domestically generated pressure.

Japan

Feeble growth of an expected 0.2% for 2013 will not cause deflation to accelerate. We expect Japan's core CPI to decline by 0.1% y/y in 2013, the same pace as in 2012.

China

After muted inflation and sluggish growth in 2012, inflation should pick up next year amid a moderate economic recovery. We see inflation at 3.6% in 2013, below the 4% target, so it is unlikely to trigger monetary tightening.

Brazil

Our high-confidence, out-of-consensus view sees inflation in Brazil breaching the central bank's 6.5% official tolerance ceiling next year and moving closer to the 7.0% mark.

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