Comparing Consumer and Manufacturer Inflation Across the Globe

This article is provided by ITR Economics in partnership with Sheet Metal & Roofing.


United States

The US Consumer Price Index was 3.0% above the year-ago level in June, significantly lower than the peak of 9.1% inflation one year prior, but still above the Federal Reserve’s long-run target inflation rate of 2.0%. While we do not forecast Federal Reserve actions, their own projections are for an additional 50 basis points (0.5 percentage points) of rise in the overnight federal funds rate this year, as they continue to tighten monetary policy to bring down inflation.

Manufacturing Producer Prices inflation, meanwhile, has fallen more quickly, with May Prices coming in 6.3% below the year-ago level. Producer Prices are generally more volatile than consumer prices, as they are closer in the economic train to raw commodities. Manufacturing Producer Prices remain well above the pre-pandemic level; Prices are about 30% higher than the five-year average for the period before the start of the pandemic. Our forecast for overall US Producer Prices is for mild decline this year and into 2024, though Prices are not expected to return to pre-pandemic levels.


For nearly the past decade, consumer inflation in Europe has been lower than in the US. In recent months, however, this trend has reversed, with disinflation in Europe’s CPI lagging behind that of the US. Europe CPI in May 2023 came in 7.1% above the year-ago level, more than three percentage points higher than in the US. Some of this difference may be a result of the different approach each region’s central bank has taken in order to rein in inflation; the European Central Bank was slower to raising rates and is still at a lower rate than the US. The war in Ukraine has also impacted their respective economies to different degrees, which is likely to have an impact on pricing trends.

The Europe Manufacturing Producer Price Index was 0.5% above the year-ago level in May. While Producer Prices in Europe have fallen more quickly than consumer prices, they too are lagging behind their US counterpart.


China’s Consumer Price Index was flat from the year-ago level in June. China has seen deflation in monthly Manufacturing Producer Prices since the latter half of 2022. Deflation in China, while not a good thing for China’s producers, is a boon to central banks in other regions, as China’s more export-heavy economy impacts prices globally.

The Chinese economy continues to struggle with its recovery as real estate markets flounder, and the rebound from COVID-19-related shutdowns in late 2022 dwindles. China’s central bank is moving opposite to most other large economies, opting to lower interest rates to stimulate demand. These moves may have an impact on Prices in the country, and the effects may reverberate across the globe.

So What?

Given a combination of disinflation and deflation globally, pricing pressures are unlikely to contribute to your top-line growth this year and next. On the back side of the business cycle, consumers and businesses alike become more price-conscious, as they look to trim excess expenses and tighten up spending. Look to expand your lower-cost offerings. If you are unable to offer lower-cost alternatives to your products, ensure you are communicating your competitive advantages to your customers – remind them why they do business with you over your competitors. Avoid locking-in input costs into long-term contracts; general prices decline in the US is likely to persist through this year at least.


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