Deflation threatens

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Prof Nouriel Roubini of New York University was one of those to correctly forecast a global recession. He is now warning in a detailed new article that “sharp deflationary pressures” are likely to hit in 2009.

As evidence, he notes:

• the supply glut that has emerged in “housing, consumer durables, motor vehicles”
• “the unemployment rate is sharply up” and “commodity prices are sharply down”
• “the Baltic Freight index – the best measure of international shipping trade – is down 90% from its May peak”

These conditions have already led to a major loss of pricing power for many chemical products in recent weeks. Whilst the blog hopes that the New Year may see some improvement, Roubini’s analysis suggests that today’s problems might instead continue for some time. Prudent CEOs and CFOs will need to develop contingency plans for this depressing prospect.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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