The global recession which had hit economies last year is still negatively effecting economic activities, especially in major economies. Perhaps one of the repercussions of the downturn is price deceleration, which is threatening stability and undermining the governments' coffers to jolt their economies out of the downfall before falling in a far-reaching calamity.

The United Kingdom will release its CPI for the month of October with expectations to show an incline by 1.4% from 1.1% on the year and 0.1% from 0.0% on the month; while core CPI is expected to rise to 1.8% from the previous 1.7%. 

CPI dropped in September to the lowest level in 5 years to 1.1% from 1.6% in August. The drop in commodity prices dragged prices to the downside, where there are many firms and retailers suffering from decline in their sales. For instance, Sainsbury Plc; the third-largest supermarket in the U.K., posted decline in sales in October.

Even though the British economy managed to mitigate the impact of the global downswing, seen by GDP of the third quarter which declined to 0.4%, however, prices are still falling despite the ongoing improvement and expansion in sectors on the one hand, and the rise in fuel prices on the other.

PMI manufacturing for the month of October came in at 53.7; while PMI services for October spiked to 56.9, the highest level since August 2007, reflecting the progress in the economies' major sectors. Also, crude prices after reaching its bottom in February below $34 a barrel, surged to one-year high in October above $81 a barrel, which participated in raising inflation estimates for October's reading.

The BoE in response to the fall in prices cut the interest rate to 0.5%, and launched an asset purchase facility program worth 200 billion pounds, after adding 25 billion pounds in November's meeting.

In November's inflation report, the bank stated that inflation might rise above 2% in near a term due to higher petroleum prices and the reversal of the value-added tax (VAT) cut. They project that inflation will reach nearly 1.6% before surpassing the target by mid-2012.

On the other hand, there are fears of long-run inflation after the economy recovers. Some of the MPC members are warning from the stimulus measures, since it may spark inflation in the future. Thus, as noticed, global economies are embarking a new phase of unwinding stimulus measures after the progress witnessed.

In addition, RPI indicator for October will be released today, with expectations showing a rise to -1.0% from -1.4% annually, and a drop to 0.1% from 0.4% on the month.

Moreover, the euro zone will release its trade balance for September. In August, the non-seasonally-adjusted reading revealed a deficit of 4 billion euros from the revised previous surplus of 12.3; while the seasonally adjusted reading, showed a narrowed surplus to 1.0 billion euros compared with the previous 6.0 billion euros.

The balance turned to a deficit as a consequence of the decline in exports, which slipped in August due to the dollar's depreciation against the euro, which made European commodities less competitive. However, Trichet recently mentioned that the current exchange rate reflects the improvement in the euro area and it is suitable.