U.S. economists expect high inflation to continue next year: "It's a perfect storm"

A survey conducted this month showed that most economists expect troublingly high inflation to persist in 2022 as supply chain bottlenecks continue to put upward pressure on prices and increasingly dampen output.

The economists' inflation expectations rose sharply from July, while short-term growth forecasts were revised downward.

Economists surveyed expected inflation to average 5.25 percent in December, slightly below the prevailing level since June. Assuming that the inflation rates in October and November are similar, it will be the longest inflation rate since the beginning of 1991 to exceed 5%.

Michael Moran, chief economist at Daiwa Capital Markets America, said: "It's a perfect storm: supply chain bottlenecks, tight labor markets, ultra-loose monetary and fiscal policies. ”

According to the average estimate of economists surveyed, consumer price inflation will fall to 3.4 percent by June and 2.6 percent by the end of next year. That's still above the average of 1.8 percent in the decade before the pandemic.

Economists cut their economic growth forecasts for this year to 3.1 percent from 7 percent in the July survey. They also cut their growth forecast for the fourth quarter to 4.8 percent from 5.4 percent.

Michael Brown, Chief U.S. Analyst at Visa, said: "High inflation erodes consumers' real purchasing power, limiting consumer spending and GDP growth. ”

This article originated from the Financial Circle Network