Global Coronavirus Watch: Time for a re-think on inflation?
We think that recent inflation surprises are not evidence of a regime shift in price-setting behaviour. But the path for inflation over the next few months is highly uncertain and depends on several difficult-to-predict factors, ensuring that every development will be intensely scrutinised.
Surging demand for goods along with major supply chain issues are likely to lead to further goods price rises even as spending patterns begin to shift back to pre-crisis norms. It will probably take several more months for freight bottlenecks and semiconductor shortages to be resolved.
But the extent to which, for instance, US durable goods prices have deviated from their longer-run trend does suggest that as we move into 2022 the goods sector may start to be disinflationary.
Another potentially major upward force globally is likely to be higher services inflation. For now, it seems that firms are returning prices to their pre-pandemic trend path, rather than pushing them on to a new higher trajectory. But services firms may view reopening as a timely opportunity to raise prices leading to a larger-than-normal clumping of price hikes.
UK: Housing market on course for a soft landing
The recent sharp fall in mortgage rates and continued strong growth in wages has significantly reduced the scale of the UK's housing affordability problem. Consequently, the risk of a steep correction in house prices is much lower than it appeared a few months ago. We also expect the recent steady pickup in housing market activity to continue.Find Out More
Global Industry: Energy transition will transform mining—promise and pitfalls
We expect that demand for energy transition-related critical minerals will grow significantly in the next decades even in the absence of rapid progress required to achieve net zero.Find Out More