Monday, 24 May 2021

Inflation pressures building “fairly sharply”

Joel Naroff, president and chief economist of Naroff Economics LLC, recently said in an interview that inflation pressures are rising.

“There is no question that inflation pressures are building, and they are building fairly sharply,” he said.

“I think we have a greater risk that this will be an extended period of inflation rather than a transitory period,” he added.

A key driver of inflation could be rising wages.

“The economy is overheating and companies, even though we have a high unemployment rate, cannot get the labor they need to meet demand and they are being forced to raise wages,” said Jonathan Golub, chief US equity strategist at Credit Suisse.

Mark Zandi, Moody’s Analytics chief economist, sees a moderation in wage increases in the coming months.

“Things will settle down probably toward the fall as the supply side of the economy catches up and people get back to work and we’re on the other side of the pandemic,” he said.

However, he sees wages becoming an issue again in 2023 or 2024.

“Wage pressures will intensify and take a bigger bite out of corporate profits,” Zandi said. “Companies will try to raise prices.”

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