As several of my recent posts show, Inflation is sneaking upon a daily life around the globe, which has so far provoked riots and protests over the Middle East. This is and should be surprising given that deflation was a major threat facing the world economy for a while ago, and policymakers at the time clamored a slogan "Don't be like Japan." What a change!

In fact, the word "deflation" has been losing an attention of general public, and fading away to a trivial word which isn't searched much on the net. According to Google, the word "deflation" is now searched less than one-fourth of the word "inflation" all over the world. It looks like that deflation is getting back into a category of antiquated, exotic terms which only the Japanese dully look for.

It doesn't mean that pressures are so mounting that prices jump, say, 20% in every corner of the world like the 1970's. In fact, price pressures are still and will be subdued in most advanced economies, because there are too many slacks in resources which are supposed to work to suppress price increase over the economy.

However weak they are, it's important to note that inflation pressures do exist, reflecting two major factors that are now pushing prices upward: food and oil. The situation is not a demand-pull but a cost-push inflation. The primary industry may flourish due to rising sales, but it's uncertain that the effects can spread to the secondary and tertiary industry amid a moderate price increase of final products.



Two-year moving correlation between the CPI growth and two inflation factors (oil and food) shows that price pressures are about to increase and be factored in consumer prices in the US and Europe. So as long as food and oil prices stay high, consumers are going to feel a price increase, however small it is, in a near term.