Global growth ability to gain traction continues to ease

With anxiety mounting about the ability of global growth to gain traction as activity in emerging markets, and most notably China, continues to ease, the associated softness of commodity prices is set to continue weighing on already weak headline inflation rates indeveloped markets. 

Most importantly for the global disinflationary trend, oil prices are holding below $50bbl, after a short-lived surge at the beginning of October. 

As well as weighing on market-based measures of inflation expectations, that softness in oil prices has already fed through to lower spot inflation rates via reduced forecourt fuel prices.

Eurozone inflation in September slipped back into shallow deflation of -0.1% y/y, from a recent 0.3% y/y high in May, though 'core' inflation - excluding food and energy costs, remains somewhat firmer, unchanged at 0.9% in September. 

Meanwhile, US CPI inflation fell back to 0.0% y/y in September, despite the 'core' rate in fact ticking up to 1.9% y/y, close to the long-run average. 

In the absence of further declines in the oil price, energy base effects - as past falls drop out of the annual comparison - should soon begin to impart some upward push to headline inflation readings internationally. 

"But the subdued oil price outlook is still set to make the expected recovery in inflation rates protracted. Evidence of a sustained pickup in underlying inflationary pressures remains unconvincing, even in the US, where the margin of spare capacity in the economy continues to narrow", notes Lloyds bank.