December 2021 Survey – Monthly Inflation Forecasts
Our monthly inflation (CPI) charts show recent actual outturns (blue) since May 2021 and consensus estimates (red) from this month’s survey up to November 2022. Rising inflation pressures – heightened by weak base-year effects – have increased speculation over the timing of monetary tightening from ultra-loose policy positions adopted by central banks to nurse economies through the worst of the pandemic.
Headline consumer price inflation in the United States went from an already-high 5.4% (y-o-y) in September to 6.2% in October, with our forecasters projecting November and December outturns of 6.6% and 6.7%, respectively (see monthly CPI chart below). The inflation environment prompted Federal Reserve chair Powell on 30 November to acknowledge that pressures could no longer be termed “transitory.” Even though the Fed expects inflation to subside next year, the current pace is such that Chair Powell announced a likely pick-up in asset-purchase tapering at the FOMC’s December 14-15 meeting, equivalent to a tightening of current policy.
Taken from Consensus Forecasts – G7 and Western Europe, December 2021.
January 2022 Survey – Assessing 2022 GDP Growth and Inflation Expectations
With the Omicron variant causing further Covid disruption across the G7 & Western Europe, forecasts for 2022 Real GDP Growth have taken a hit this month. The GDP consensus for the US, Japan, Germany and the Euro zone started trending noticeably downward in October, when concerns over surging natural gas prices upended initial expectations.
All countries featured except Japan are now seeing 2022 CPI projections of above 3% – and close to 5% for the US and UK. Price pressures crept up for much of 2021 on the back of Covid resurgences and ongoing supply-chain bottlenecks. However, the October jump in energy costs exacerbated concerns that inflation was becoming less transitory (and more entrenched) than policymakers had hoped. Many central banks are now aiming to wind down QE and return to interest rate normalization: the Bank of England at its December MPC meeting raised the Base Rate to 0.25%.
Given the deep economic recessions of 2020, activity ever since has been buffeted by stop-start Covid restrictions. Since late-November 2021, the emergence of a more contagious variant, Omicron, has provoked breakthrough infections in the vaccinated as well as the unvaccinated. Soaring case numbers have put renewed pressure on heathcare systems and resulted in further restrictions. Our panel’s investment forecasts have dropped noticeably in recent months, with Germany particularly affected by global supply-chain difficulties hitting its exporting industries. UK investment has also been curtailed by added Brexit strains.
Taken from Consensus Forecasts – G7 and Western Europe, January 2022.
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