zondag 8 november 2015

Working Age Vs. Consumer Price Index

Working Age has effects on the P/E ratio as described here, but also has an effect on the inflation rate.
Yardeni describes this perfectly here. Younger people simply spend more than older people and contribute more to GDP and inflation. If we plot the percentage of younger people in society against the inflation rate we have a very nice correlation.

This explains why Japan had a deflationary environment for so many years due to its low fertility rates. Knowing this, we now can expect inflation to go back up in China because they just announced an end to the one child policy this month in 2015. But this inflation will only come when these babies start to work.

Bonus chart:

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