Dry Powder: The Private Equity Podcast
Macro Update: The Flip Side of Inflation
Dec 19, 2023
Exploring the impact of a deflationary environment on stakeholders. Inconsistency between consumer sentiment and economic data. Germany's technical recession and challenges for fiscal stimulus. Thematic investing and the upside of automation for labor enhancement.
22:09
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Quick takeaways
- Super core inflation, which takes out food, energy, shelter, and used vehicles, is a better indicator of general price levels and is currently below 1990s levels, raising concerns of potential deflation.
- Falling prices can hinder growth as they impact volume, demand, and consumption, which make up 70% of US GDP, highlighting the irony that falling prices can actually hinder growth.
Deep dives
Inflation and Deflation Concerns
The podcast episode discusses the concern of too much deflation following a period of inflation. The managing director of Bain's Macro Trends Group explains that while headline inflation figures have been pleasantly low due to factors like energy prices working their way out, super core inflation, which takes out food, energy, shelter, and used vehicles, is a better indicator of general price levels. Super core inflation is currently below 1990s levels, raising concerns of potential deflation. The potential impact of deflation on retailers, inventory, and consumer behavior is also discussed.
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