March 13, 2015
That would be unless the business in the oil industry. A NYT piece on the drop in inflation across Asia seems confused on this point. It notes the sharp decline in the inflation rate across the region, which is mostly due to lower oil prices, and raises the concern that this may discourage businesses from investing.
This logic doesn’t work insofar as the lower inflation is simply due to lower oil prices. From the standpoint of a business considering a new investment what matters is the price of the product it sells, not prices in general. If the price of cars is expected to rise by 2 percent a year, then businesses will take this projected rate of inflation into account in planning their investment. The fact that lower oil prices will reduce the overall rate of inflation should not affect its decision, except insofar as lower oil prices could mean that consumers have more money to spend on cars.
The basic story here is straightforward, lower oil prices are good for promoting growth except in countries that are large producers of oil. They are of course awful from the standpoint of the environment. (In addition to increasing oil consumption and greenhouse gas emissions directly, lower oil prices will also discourage investment in clean energy.)
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