The Organization for Economic Co-operation and Development (OECD) said annual growth in the price of goods and services in the group of 37 advanced countries slowed considerably in March as Covid-19 focused on business and social activities dead.
Against a backdrop of waning consumer and business demand as governments impose strict lock-in measures to limit the spread of the virus, inflation in the OECD area fell to 1.7% in March from 2, 3% in February, the sharpest deceleration since the 2008 financial crisis.
Against a backdrop of falling world oil prices in the midst of a price war between Saudi Arabia and Russia and as the world economy heads into the deepest recession since the Great Depression, the group based in Paris said energy prices fell 3.6% in March against a dramatic backdrop. a 2.3% increase in February. Food price inflation rose to 2.4% in March from 2% a month earlier.
There is growing concern that the global recession triggered by the coronavirus pandemic is causing a damaging deflationary spiral. Deflation is when the price of goods and services drops for an extended period.
Consumers can defer purchases in anticipation of cheaper prices in the future. However, companies can cut wages to keep up with falling prices, creating a vicious cycle.
Janet Henry, chief economist at HSBC, said she expected inflation in the United States, the euro area and most wealthy G10 countries to turn negative in the coming months.
“Inflation is heading even lower, driven by the latest collapse in oil prices. “
She warned that inflation could skyrocket if governments and central banks overestimate the damage caused to the global supply chains by the pandemic, and offered too much support to businesses and households to keep spending down.
However, if Covid-19 paralyzes the economy worse than expected, “further slackening of the economy resulting from a failure to stimulate demand sufficiently could ultimately lead to below target inflation or even pure deflation and simple, ”she added.
Falling demand for clothing, as shoppers stayed away from the main street in March, lowered British inflation to 1.5% in March from 1.7% in February. Economists expect a further decline in inflation in Britain as the fall in the world price of oil drives down the price of oil.
Research by the Office for National Statistics has shown that the prices of some high-demand products, such as long-life foods, sanitary products and pet food, have risen sharply in recent weeks. consumers rushing to store them.
However, the government statistical agency later said that it had made data collection errors and that prices had not increased as much as previously thought.