Economic growth has effectively collapsed over the last quarter relative to what was expected at the start of the quarter, but it has not collapsed in absolute terms. Nevertheless, this deceleration in growth and the corresponding drivers have raised fears about the return of stagflation.
In this Economics Weekly, we examine these factors, with the view that while there is an incredible amount of economic uncertainty at the moment and inflation is high, we are not yet in a scenario that is consistent with the “stagflation” label. We also acknowledge that the economy is transitioning into a new, riskier phase of the economic cycle, one that will necessitate both the central banks and the central planners (in China) to deftly negotiate their way through.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.