1/14- Weekly Economic Highlights
Jan 14, 2022 | Weekly Highlights
Inflation continues to run well above the Fed’s longer-run target of around 2.0%. The Consumer Price Index (CPI) was up 7.0% year-over-year in December, versus up 6.8% year-over-year in November. Core CPI (CPI less food and energy) was up 5.5% year-over-year in December, versus up 4.9% in November. Pricing pressures were widespread in December, with notable gains for used cars and trucks, new vehicles, food, and rent. While we believe year-over-year inflation may be at or near a peak, we expect pricing pressure will remain elevated over the near-term. The ports of Long Beach and Los Angeles remain congested, and we believe the China’s ‘zero-Covid’ strategy and the upcoming Chinese Lunar New Year holiday may also exacerbate global supply chain disruptions near-term. Meanwhile, we believe the current surge in US Omicron cases is likely putting additional strain on labor supply, fueling continued upward pressure on wages. However, we expect inflationary pressure will start to abate later this year, amid an improvement in the global health situation, easing supply chain bottlenecks, and a potential shift in consumer spending toward more services spending rather than goods. In addition, over the coming months, year-over-year inflation readings will also start to comp against rising inflationary pressures last year. Fiscal drag and normalizing monetary policy should also help to ease pricing pressures as we move through this year, in our view.