These are pictures of Rhett's 'Become a Property Billionaire' event in London.

Not so long ago inflation concerns dominated the debate, but now policymakers are pulling out all the stops to get the economy moving to stave off deflation (falling prices across the economy). Increasingly aggressive measures are being taken, with today’s Pre-Budget Report marking the opening salvo of the UK’s fiscal response.

Price pressures are receding as quickly as they advanced. In the space of a mere eight months, UK inflation surged by three percentage points, reaching a peak of 5.2%in September. But inflation fell back to 4.5% last month - the largest monthly drop since 1997. With oil prices falling off a cliff since the summer, it is hardly surprising that energy was one of the main factors behind the retreat. But amid the deteriorating demand conditions, core inflation (which excludes oil and food prices) also nudged lower by a substantial 0.3 percentage points, indicating that firms’ ability to hike prices is waning in most (if not all) sectors.

There are growing concerns that inflation could turn into deflation. The difference between yields on nominal and inflationprotected bonds is an important gauge of inflation expectations. In the UK, nominal bonds are currently yielding 150bps less than their inflation-protected counterparts, implying that investors anticipate a period of falling prices over the next two years. Together with the release of the latest Monetary Policy Committee minutes documenting the Committees’ unambiguously downbeat assessment of growth prospects, the implications are clear. Interest rates will be trimmed further – we expect a trough in rates of c1% next year.

UK shoppers delivered another surprise, spending more on the high street in October than suggested by downbeat industry surveys from the likes of the British Retail Consortium and the CBI. Retail sales fell by ‘only’ 0.1% on the month, taking the yearly growth rate down to 2%. It looks as if households were trying to stem the inevitable belt-tightening by drawing down their liquid assets (deposit growth has slowed to 6.6% y/y from 8% a year ago) and swiping their credit cards. However, the resilience is likely to be short-lived. In particular, the deterioration in the labour market that is now well under way will weigh heavily on consumer spending.

There was a similar about-turn on the inflation front in the United States. Consumer prices recorded their largest ever month-onmonth fall in October as declining oil prices pulled energy and fuel costs down by over 8%. But the moderation was not purely the result of energy price trends, as core CPI (which excludes food and energy) declined for the first time since 1982. Prices for new and used autos fell as troubled car makers tried to offload their output at discounted prices to an ever more financially-constrained consumer. Prices of other discretionary items also dropped. We don't usually refer to weekly jobless figures but, in the week to the 15th November, US initial jobless claims jumped to the highest level since 1992. This is a worry, as the total number on benefits has already reached levels last seen in December 1982, while the US economy is forecast to contract next year. Fewer people in jobs mean less spending and lower growth, and ultimately less upward pressure on prices, further fanning deflation concerns.

Flash estimates of business activity in the Eurozone suggest that policy measures taken to date have failed to stop the rot. The composite Eurozone PMI, a key leading indicator, dropped below 40 for the first time since the series' inception. The downturn was particularly marked in the manufacturing sector, whose PMI fell to a series low of 36.2, far below the 50 mark that separates expansion from contraction. The Eurozone's two largest economies are shouldering their share of the pain. Readings for Germany and France both fell to record lows, suggesting that overall economic activity will contract in Q4.

The Japanese economy has officially entered recession, contracting for the second consecutive quarter in Q3. The outlook isn’t good for Q4 either. The merchandise trade balance deteriorated sharply in October as Japanese exports struggled to find a home. This was the third consecutive negative balance and the largest deficit in 27years. The last time the trade balance turned negative so sharply was at the start of the deep global recession of the late 1970s/early 1980s. Things are going to get worse before they get better.