High Inflation to Continue into 2022

New York, NY, October 18, 2021-Uncomfortably high inflation will grip the U.S. economy well into 2022, as constrained supply chains keep upward pressure on prices and, increasingly, curb output, according to economists surveyed this month by The Wall Street Journal.

“The economists’ inflation projections are up dramatically from July, while short-term growth outlooks are lower.

“Economists on average see inflation at 5.25% in December, just slightly less than the rate that has prevailed since June. Assuming a similar level in October and November, that would mark the longest inflation has been above 5% since early 1991.

“Most economists expect it will take until the​second quarter of 2022 or later for supply-​chain slowdowns to recede.

“‘It’s a perfect storm: supply-chain bottlenecks, tight labor markets, ultra-easy monetary and fiscal policies,’ said Michael Moran, chief economist at Daiwa Capital Markets America.

“Consumer-price inflation will drop to 3.4% by June of next year, then 2.6% by the end of 2022, according to respondents’ average estimates. That is still above the average 1.8% that prevailed in the decade before the pandemic.

“Economists slashed growth forecasts this year, to an average 3.1% annualized in the third quarter from 7% in the July survey. They also lowered projected fourth-quarter growth to 4.8% from 5.4%.


“‘Consumer spending, and by extension GDP growth, is being limited by high rates of inflation eroding the real purchasing power of consumers,’ said Michael Brown, principal U.S. economist at Visa.

“Concerns about limited supply are the main cloud over the outlook. Around half of respondents cited supply-chain bottlenecks as the biggest threat to growth in the next 12 to 18 months, while nearly one-fifth pointed to labor shortages. They also expect supply-chain woes to weigh on the economy through much of next year. Some 45% estimate that it will take until the second half of 2022 for bottlenecks to have mostly receded, compared with two-fifths expecting major improvement before then.

“Concerns about Covid-19 have receded. It was flagged by just 8.2% of respondents as the main risk to growth. Still, some respondents said that Covid-19 is the biggest factor in setting the economy’s course for the next year or so. ‘Fundamentally, it’s Covid and people’s reaction to it that’s leading to labor shortages and supply-chain bottlenecks, which in turn is feeding into higher inflation,’ said Leo Feler, senior economist at UCLA Anderson Forecast.

“Many economists cited unusually robust demand for goods throughout the pandemic as the chief source of strained supplies-and, as a result, a key source of inflationary pressure. Goods demand has remained high even as widespread vaccination allowed the economy to reopen and for consumers to resume spending on services. When supply-chain-induced pressure on prices subsides depends to some extent on when consumers rebalance their spending, said Constance Hunter, chief economist at KPMG.

“‘The question right now is, are they going to spend on goods or services?’ she said. ‘Is the box under the Christmas tree going to be another piece of exercise equipment, or like, ‘Hey, we’re going on vacation in March?’