The supply chain crisis was one of the most prominent economic events of the pandemic.
However, according to the supply chain tension of the future, there is no Liz Saunderschief investment strategist Charles Schwab Corporation schw, Quoting the Kansas City Fed November Index,
With a view to crashing the shortest on record for supplier delivery times, that leaves us to ask – When will inflation come down?
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— Liz Ann Sonders (@LizAnnSonders) November 18, 2022
Looking back, we wonder how we got to this point.
Today’s high inflation indicates limited supply of products and high demand for similar goods. The most prominent examples of restricted supplies are the energy and food industries directly affected by the conflict between Russia and Ukraine.
However, inflationary pressure had already started before this.
As the COVID-19 pandemic began to spread in 2020, world trade essentially came to a halt.
Many companies were forced to close to prevent the spread of the virus, with exceptions decided by policy makers to provide “essential” services.
Many governments introduced emergency measures, such as financial aid, to help consumers and businesses cope with economic hardships related to the pandemic.
These policies helped consumers put money toward things like vehicles, gym equipment, and home renovation projects, rather than toward services and leisure activities (e.g., eating out, going to health clubs, and traveling).
In some sectors of the economy, the increase in demand exceeds supply.
Production was affected due to trade delays related to the pandemic, resulting in shortages of popular items. As a result, supply chain problems began to emerge in the early stages of this surge, and the impact on inflation became apparent as early as 2021.
It has worsened since then. The Federal Reserve is aggressively cooling demand by raising short-term interest rates, among other measures.
It’s working – Commodities less food and energy goods (includes apparel, new and used vehicles, alcohol and smoking products) fell -0.4% on a seasonally adjusted basis, according to the latest inflation data released by the BLS. Gaya, which has declined the most. New and used cars, and apparel.
By the end of 2023, the core PCE index – a key indicator of inflation – could fall to 2.9%, according to analysts Goldman Sachs Group Inc g s,
According to preston caldwellCertain product categories, such as vehicles and energy, have been the main drivers of inflation in recent years, said the chief of US economics at Morningstar Research Services.
He anticipates that pressures on those industries — such as semiconductor shortages and supply-chain problems and disruptions brought on by the conflict in Ukraine — will ease.
Caldwell says that inflation is moderating and interest rates are starting to return to normal levels.
“The Fed’s tightening will substantially cool the overall economy in 2023 and 2024, extinguishing the fires of inflation before they spread to the broader economy,” he said.
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