Will consumer price inflation in the United States hit a new 40-year high?

Will consumer price inflation in the United States hit a new 40-year high?

Rising consumer prices in the United States likely hit a new four-decade high in December, ending a year of soaring inflation fueled by supply chain bottlenecks, labor shortages and heavy expenses.

Economists polled by FactSet are forecasting a 0.5% month-over-month increase in the Consumer Price Index when the Bureau of Labor Statistics releases its report on Wednesday. That would leave CPI inflation up 7.1% year on year, which would represent the largest annual increase since February 1982. In November, consumer prices rose 6.8% on a year-over-year basis. annual and 0.8% compared to the previous month.

Price hikes accelerated through much of 2021, prompting Federal Reserve officials to consider earlier and faster increases in interest rates as the central bank unwinds its economic support. in place at the start of the coronavirus crisis.

The minutes from the last Fed policy meeting noted that supply chain disruptions and labor shortages are expected to last longer than officials initially expected, adding to signs that high consumer prices could be here to stay even if inflation calms down in 2022.

“Inflation appears to be nearing its peak, as the collision of strong demand induced by the federal stimulus fades and supply chain problems ease,” said Brad McMillan, chief executive officer. Commonwealth Financial Network investments. “With weaker demand and higher supply, we should see price changes start to normalize in 2022.”

Analysts at the Wells Fargo Investment Institute recently predicted that annual CPI inflation will average 5.3% this year, alongside two interest rate hikes by the Fed. Matthieu rocco

Did UK monthly GDP growth accelerate before Omicron took hold?

The UK’s economic recovery is expected to gain momentum in November before the spread of the Omicron coronavirus variant hits the country, possibly reaching pre-pandemic levels for the first time since the onset of the crisis.

Bethany Beckett, an economist at Capital Economics and Ellie Henderson, an economist at Investec, both expect the country’s gross domestic product to rise 0.5% between October and November, the date of the data release Friday, marking an acceleration after the virtual stagnation of October.

The supply chain disruptions that dragged down manufacturing output in October “were still plentiful in November, only subsiding a little,” Henderson said. However, she believes “there should have been some rebound in mining and quarrying and utilities,” and output in the construction sector “may have partially recovered from its October drop. “.

With people returning to the workplace and city centers, and Christmas shopping taking place earlier, output in the service sector is also expected to have accelerated to 0.5% growth in November.

If such projections hold true, the UK’s monthly GDP measure could have returned to levels not seen since February 2020.

But momentum looks set to slow temporarily for December, as the Omicron spread has discouraged or halted some areas of economic activity even without legal restrictions in place. With the surge in Covid infections, production may have declined by around 0.8% in December, according to Beckett.

“Not only does demand appear to have been affected by the assembly of Omicron enclosures, but personnel shortages are also disrupting production in some areas,” said Henderson. Valentina romei

What future for gas prices in Europe after the crazy race in December?

Even in a year in which the rebound in the global economy and tight supply led to an unprecedented rise in global gas prices, December stood out.

In the week leading up to Christmas, futures contracts linked to the wholesale gas price in Europe, already at an all-time high, soared to over € 180 per megawatt hour as confidence in Russian supply weakened further.

The strength of the rally was such that ships carrying liquefied natural gas originally destined for Asia changed course midway through. In total, around 7.3 million tonnes of LNG were delivered to Europe in December, according to consultancy Rystad Energy.

Imports, aided by warmer-than-expected weather forecasts, have worked. As of January 4, European prices had stabilized at around € 90 per megawatt hour, although up around 350% compared to the same period last year.

The volatility is unlikely to end anytime soon. Rystad predicts that weak gas flows from Russia to Western Europe will continue as the showdown over Ukraine persists, leading to “still high prices.”

European storage levels, meanwhile, remain low, leaving the continent little wiggle room as it monitors the weather forecast for any sign of colder temperatures.

In Asia, the outlook is less worrisome, with large LNG stocks in place in several countries and current forecasts of temperatures at or above normal in the coming weeks. Tom wilson

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