Via Oxford Economics, a UK think tank: Could swine flu tip the world into deflation? Excerpt:
Health experts agree that, while the current flu epidemic that started in Mexico in April 2009 may weaken during the summer, it could re-appear in the autumn, possibly in a stronger form.
Using historical benchmarks of previous flu pandemics and of the SARS episode, we estimate the economic impact of a global flu pandemic in the UK.
The GDP loss during the six months of the pandemic would amount to around 5% in the UK. That a pandemic is likely to hit the global economy just as it starts to recover from recession could result in the economic impact being larger than would otherwise have been the case, and this could tip the world and UK economies into deflation.
UK CPI inflation would fall to around -1% throughout 2010-12 and UK GDP growth next year could be as low as -7½%.
The complete report is available on the site as a PDF.
