July 2022 Survey – Monthly Inflation Forecasts
Our monthly inflation (CPI) charts show recent actual outturns (blue) since March 2022 and consensus estimates (red) from this month’s survey up to September 2023. Inflation pressures – heightened by the outbreak of war between Ukraine and Russia and subsequent enegry/commodity price crisis – have led to monetary tightening from ultra-loose policy positions adopted by central banks to nurse economies through the worst of the pandemic.
Even after the Fed hiked its target funds rate by 75 basis points to 1.50-1.75% last month, our panel’s projections for US headline CPI in 2022 and 2023 continued to track upward. Indeed, the June CPI came in at 9.0% (y-o-y), up from 8.5% in May. Corporates and households have been supported for more than a decade by accommodative monetary conditions. Add to that massive bouts of Fed and fiscal stimulus in an effort to nurse the economy through the pandemic, as well as pent-up demand not just for goods, and services, but also for workers, and the US economy had become overheated. So the Fed is embarking on what will likely be an aggressive hiking cycle.
Taken from Consensus Forecasts – G7 and Western Europe, July 2022.
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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