International Inflation and Deflation Trends over the Past 5 Years

International Inflation Rates Had Ups and Downs Over Past 5 Years.

The global economy has suffered some serious setbacks since late 2007, with some economists and experts going so far as to call it the “Great Recession,” after the 1920s-era Great Depression. And that certainly is an apt term for it, as the spread of the crisis has not been limited to a few countries.

Nearly every country in the world has been affected in some way, which is a telling sign of the modern international economy.

Inflation is one of the key indicators as to the health of the economy, but it needs to be looked at in context in order to have any value. Economists often use stretches of five years of rates, and they examine the way inflation has grown or shrunk during this time. This is then seen as an inflation trend, which can be positive or negative. Here are some inflation trends of various countries over the past 5 years.

Inflation in the United States

In many countries, as it is in the United States, inflation is measured with something known as the Consumer Price Index (CPI). This looks at the cost of things like food, energy and fuel, new and used cars, clothing, shelter, transportation, and medical care, collectively known as a market basket. The change in the cost of these things are studied monthly and released by the Bureau of Labor Statistics. The change is listed as a percent. This is then used to determine a trend.

The general trend of inflation in the United States has been somewhat erratic over the past five years. Inflation was trending steadily upward until July 2008, at which point it spiked hugely, then began to decrease. In 2009, the annual inflation rate fell to negative (deflation) for the first time since 1955. The crashing stock market caused a contraction in the overall wealth of the nation and the money supply so consumers, made wary by the uncertain economy, were less willing to spend money.

In response to this, companies tried to lower the cost of their items, hoping to encourage consumers to purchase their products. Since then, inflation has swung slightly either way, with some months reporting inflation and others reporting deflation. The yearly trends are much the same. In 2008, for instance, inflation was a low .091% for the entire year; 2011 reported an inflation rate of 2.962%.

Inflation Canada

A CPI is also used in Canada; it is released monthly by Statistics Canada. Their CPI is published with gasoline prices and without, reflecting the
sometimes unstable nature of gas prices in that country. Statistics Canada has a slightly different market basket than the United States, including the cost of alcohol and tobacco. Like the United States, the CPI in Canada has been unsteady, peaking in 2008 and then sharply dropped to its lowest point, negative inflation (deflation), in 2009. Inflation climbed back up to its 2008-level highs. Inflation is currently on a slow downward trend.

The Eurozone

The Eurozone uses slightly different criteria. The consumer price index is known as the HICP, or Harmonised Index of Consumer Prices, which is reported monthly. As the members of the Eurozone generally share a currency, the Euro, this allows for there to be one standard measurement of the price index in these countries. One exception to this is the United Kingdom, which uses a separate CPI. One of the benefits of the HICP, though, is that it can be compared to international consumer price indexes.

The HICP was known for being highly consistent; it usually was around 2.2% with small changes from year to year. However, from 2008 onwards, the HICP has been unstable. In 2008, inflation spiked to 3.3%; in 2009, it dropped to .3%. The HICP rose in 2010 and 2011, with rates of 1.6% and 2.7% respectively. The rate is expected to be about 2.5% in 2012, so the rate may be stabilizing, but it is too early to make an educated guess.

The United Kingdom

Since the United Kingdom still uses pound sterling, it maintains its own independent CPI. General information about the economy is reported by the Bank of England, but the UK Office for National Statistics reports the inflation rate itself. The CPI is highly comparable to the HICP, making it simple for London accountants to keep an eye on the rates both at home and abroad. England’s inflation rates have followed similar trends as the United States, Canada, and the rest of the Euro-zone.

Rates in early 2009 were around 3%, but they fell over the year to a low of 1.1% in October 2009. Since then, the CPI has been rising slowly, although there have been some mild changes. Recently, CPI growth has been unchanged at 2.7%. The Bank of England’s quarterly reports give information not only about the current rates, but about predicted rates as well. Currently, the Bank of England is predicting that its rates will continue to stabilise over time.

In Conclusion

Although the numbers themselves have been different, the general trends of inflation all over the world have been quite similar. This is a testament to just how closely linked the economy of every country is. As the world recoils from the shock that is the Great Recession, it pays to keep an ey on the progress of both inflation and deflation.

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Image courtesy of Renjith Krishnan / FreeDigitalPhotos.net

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