The article is written by David Rosenberg, an economist and strategist, who argues that while some effects of the pandemic may linger, inflation is not one of them. He makes several points to support his argument:
- Supply chain disruptions will ease: With the success of vaccination efforts, supply chains are expected to normalize, easing shortages in various industries.
- Stimulus checks and unemployment benefits will end: This will lead to a decrease in demand growth, reducing pressure on prices.
- Fiscal stimulus from the Biden team will be met with resistance: New proposals for infrastructure spending may face opposition in Congress, limiting the potential for further fiscal stimulus.
- Personal savings rates will return to normal: As government transfers decline and real incomes grow, personal savings rates are expected to level off at a lower rate than current levels (27.6%).
- Consumer spending on durable goods will be offset by reduced services demand: The surge in durable goods consumption during the pandemic may lead to a decrease in demand for services, such as travel and entertainment.
- Government deficit will bump against household surplus savings: This mismatch between government spending and household savings will reduce pressure on prices.
Rosenberg concludes that these factors will contribute to a decline in inflationary pressures, making a "bull-flattener" scenario (a flattening of the Treasury yield curve) more likely. He invites readers to join him for a webcast with Don Coxe on May 19 to discuss this topic further.
Key points:
- Inflation is not a concern, despite current shortages and price increases.
- Supply chain disruptions will ease as vaccination efforts succeed.
- Stimulus checks and unemployment benefits will end, reducing demand growth.
- Fiscal stimulus from the Biden team may face resistance in Congress.
- Personal savings rates will return to normal, limiting inflationary pressure.
Overall, Rosenberg’s argument suggests that while some effects of the pandemic may persist, inflation is not one of them.