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U.S. Inflation: Outlier?
U.S. Inflation Starting to Look Like a Stimulus-Led Outlier
Covid inflation is everywhere, but some have more of it than others. Among advanced economies, the U.S. is starting to look like the outlier. That's probably because it did more fiscal stimulus in the pandemic, economists say. The consensus is that high inflation won't last long.
August data due Tuesday is set to show annual growth in U.S. consumer prices stayed above 5% in August for a third straight month, according to Bloomberg surveys. The median forecast was 5.3%. Most other developed countries have seen a spike too -- just not nearly as big. The latest consumer poll by the New York Federal Reserve, published Monday, showed U.S. households expect inflation to stick around 4% over the next three years.
Much of the current wave of inflation has been driven by stretched global supply-chains. But research by the Institute of International Finance shows that while problems like longer delivery times are affecting all economies, they're most acute in the U.S. –- and price markups by firms are bigger there too. That suggests stronger American demand is a key part of the picture.
"What's striking is just what an outlier the U.S. is, when you actually put all the countries' supply-chain statistics next to each other," says Robin Brooks, the IIF's chief economist. "It's pretty clear to me that the fiscal side is what makes the U.S. stand out."
"There is nothing inherently dangerous about inflation settling in, say, a 3-5% range" instead of the 1-2% that's been normal for the past decade, he wrote last week. The bigger risk is that hitherto dovish central bankers "lose their nerve" and raise interest rates until it causes a recession, like they've done in the past.
Covid inflation is everywhere, but some have more of it than others. Among advanced economies, the U.S. is starting to look like the outlier. That's probably because it did more fiscal stimulus in the pandemic, economists say. The consensus is that high inflation won't last long.
August data due Tuesday is set to show annual growth in U.S. consumer prices stayed above 5% in August for a third straight month, according to Bloomberg surveys. The median forecast was 5.3%. Most other developed countries have seen a spike too -- just not nearly as big. The latest consumer poll by the New York Federal Reserve, published Monday, showed U.S. households expect inflation to stick around 4% over the next three years.
Much of the current wave of inflation has been driven by stretched global supply-chains. But research by the Institute of International Finance shows that while problems like longer delivery times are affecting all economies, they're most acute in the U.S. –- and price markups by firms are bigger there too. That suggests stronger American demand is a key part of the picture.
"What's striking is just what an outlier the U.S. is, when you actually put all the countries' supply-chain statistics next to each other," says Robin Brooks, the IIF's chief economist. "It's pretty clear to me that the fiscal side is what makes the U.S. stand out."
"There is nothing inherently dangerous about inflation settling in, say, a 3-5% range" instead of the 1-2% that's been normal for the past decade, he wrote last week. The bigger risk is that hitherto dovish central bankers "lose their nerve" and raise interest rates until it causes a recession, like they've done in the past.
https://www.bloomberg.com/news/articles/2021-09-13/u-s-inflation-is-starting-to-look-like-a-stimulus-led-outlier
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