- The US economy could soon be at risk of deflation, according to Wermuth Asset Management.
- Wobbling commercial property values a correction of lofty stock valuations would drag prices lower.
Disinflation could soo turn to deflation in the US, partly due to the risk of crashing stocks and real estate prices, according to Wermuth Asset Management.
Already, commercial property values are under pressure, while a potentially overvalued stock market could face a swift correction if conditions sour. A plunge in the price of these assets would go a long way in sparking deflation, the firm argues.
“To speculate about deflation again at this point looks premature at first glance, but not at the second. For several reasons the risk of a falling consumer price level has increased,” economist Dieter Wermuth said in a note on Wednesday, pointing to various pressures that could weigh down inflation in the economy.
That’s contrary to what other economists have been saying, with many warning that inflation is a lingering problem and will stay sticky. Prices accelerated 3.3% year-per-year in July, slightly higher than the 3% price growth seen in June.
But deflation could soon be in the cards when examining the huge downside risk that lies ahead for stocks and real estate assets, Wermuth warned.
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Source: www.businessinsider.in
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