There is a very good chance that inflation will fall in the near future. This was stated by the economist Eden Mujagic, who gives two reasons. First off, it was June of last year when energy prices skyrocketed. There are also growing signs of a slowdown in economic activity in the Netherlands, Europe and the United States. “In short, this means that demand growth is slowing down, which is helping to dampen inflation.”
For example, three quarters of Dutch companies are now unable to pass on the entire increase in wage costs to the customer. This is out of fear that the turnover will no longer be achieved because customers will avoid the shop. So, aside from the likelihood that energy isn’t as absurdly expensive as it was a year ago, and aside from the expected economic slowdown, inflation simply has a limit.
Note: If inflation goes down, that doesn’t mean prices go down too. “If inflation goes from 10 to 2 percent, it doesn’t mean everything will get cheaper, just that it will get more expensive a little slower than before.”
Butter as a precursor
Noteworthy news: Food prices in Germany are up 20%, but butter prices are down 30% since December. This has to do with the fact that the butter market is a specific market with short term contracts that are reviewed every few weeks. So if production costs like electricity and gas go down, we’ll see it in butter prices rather than other food products, Mujagic says.
“Butter price could be a harbinger of good news on the inflation front”
“If so for the butter. Then it will also play a role with other food products, albeit late, because there you have to deal with those six-month contracts». But according to Mujagic, there will come a time when what happens to butter at some point will also happen in other parts of the food chain and that butter is therefore a sign of declining inflation. “Boring as butter can be.” Mujagic doesn’t rule out that some of those food prices will actually fall.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
