Ongoing steep price hikes continue (Fuel +60%, Energy +42% and food +10% vs last June). These are due to a mix of high consumer demand and challenging supply factors, but some shifts are emerging that may rake in inflation overtime
💰 High consumer demand:
Driven by more cash in pockets with record government spending and economic stimuli ⇝ now stopped
Higher savings with people homebound and concerned ⇝ savings now getting used, especially in lower income groups.
Lower interest rates over last two years ⇝ the Fed is now raising, may hike another 1% in July (in June raised +0.75% that rocked markets). Hopefully avoids recession.
🛒 Limited supply:
Labor shortages are impacting almost every industry, hiking up wages
Geopolitical crises, notably the Ukraine war impacting commodity and energy prices
Global supply chain challenges limited product availability and had high global transportation costs ⇝ some retailers now have too much “wrong” inventory that people aren’t buying (e.g., TVs, casual wear). These may get promoted and bring some prices down.
There is another interesting perspective to consider by CNBC (Jul 16, 22):
“The size of the millennial generation is to blame for sky-high inflation”
“See, what everyone is not including in the conversation is what really causes inflation, which is too many people with too much money chasing too few goods,” Bill Smead, chief investment officer at Smead Capital Management. “… in the U.S. there are an estimated 92 million millennials... The last time we saw what we call ‘wolverine inflation’ — which is inflation that is hard for policymakers to stop — was when 75 million baby boomers had replaced 44 million silent generation people in the 1970s.”
“So … a whole lot of people, (aged) 27 to 42, who postponed homebuying, car buying, for about seven years later than most generations… but in the past two years they’ve all entered the party together (making up the largest, 43% of home buyers), and this is just the beginning of a 10-to-12-year time period where there’s about 50% more people that are wanting these things than there were in the prior group.”
While Millennials are indeed also pulling back purchasing due to high inflation and interest rates, their sheer size as the largest US generation certainly can make them a contributor to what we are seeing!