Macroeconomic Round Up

In 2021, the prices of goods and services rose more than they did in any year since 2008, leading to concerns about the potential impact on consumer spending, interest rates, and corporate margins.

The inflation spike is the result of an exceptional surge in demand for goods that has outstripped the ability of supply to keep pace, exacerbated by pandemic-related supply chain disruptions. The result has been a combination of delivery delays, stock shortages, and price increases for certain goods. But while inflation has proven broader and longer-lasting than expected, the prices of some of the goods and services most impacted by surging demand have started to normalise. As demand shifts back from manufactured goods toward services, it may be that a new equilibria between supply and demand is to be found.

Labour shortages have been a challenge in some sectors as economies have reopened. More than 30 million people quit their jobs in the US in the year to August and around 5 million fewer people are participating in the US labour force than prior to the pandemic. This has contributed to record job vacancy rates and higher wage growth.