COMP NEWS – Inflation has been notably high for the last year, as supply chain issues have caused product shortages, and an increase in the money supply through stimulus checks and other government assistance has increased consumer spending. Luckily, many economists are predicting that the rise in prices will begin to regulate during the next calendar year.
Consumer prices rose 6.8% for the 12 months ending in November, a 39-year high. Many economists expect inflation to remain near this level a few more months but to then moderate through 2022 for a variety of reasons. Households could even see relief in some areas within weeks. Prices have dropped on global markets for crude oil and natural gas, which is filtering into lower prices at the pump and for home heating.
As the pandemic caused many shutdowns in a variety of economic sectors, many products were simply unable to meet consumer demand. However, as global conditions continue to improve, many suspect that these irregular shortages will be resolved.
Russell Price, chief economist at Ameriprise, expects inflation to peak at 7.1% in December and January, for example. After that, he expects the inflation rate to fall toward 4% by the summer and below 3% by the end of the year, but to stay above 2% through 2023.
One reason for the moderation, he said, is improving supply chains. They had become ensnarled when the global economy suddenly returned to life following its brief shutdown, and economists hope increasing availability of everything from computer chips to shipping containers will help inflation to ease.
In addition, the government is expected to take some actions that may relieve some inflationary pressures.
The U.S. government will also potentially offer less aid to households in 2022, whether that’s through child tax credit payments or beefed-up unemployment benefits. That could also lead to fewer purchases by Americans, further lessening the pressure on inflation.
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