Economists at Guggenheim Investments, like the Federal Reserve, believe that today’s higher timber prices and shortages of essential parts, materials and labor are unlikely to last long enough to cause runaway inflation.
“Supply chain disruptions are spreading in everything from semiconductors to wood, contributing to fears of higher inflation en route,” economists Brian Smedley and Matt Bush wrote in a note Monday.
They said, “These disturbances are exacerbated by high demand with the reopening of the economy and fiscal policy providing strong tailwinds for consumption.”
But economists also expect prices for some key materials to rise, including a slowdown in wood prices
To more than $ 1,200 per 1,000 board feet from as little as $ 200 a few months ago, to mitigate once capacity begins to pick up in sawmills, factories and manufacturers later this year.
“While these supply problems may be a challenge in the near term, investors need to realize that these types of price pressures, typical of an economic recovery, are more like one-off adjustments than the type of sustainable inflation that would drive the Fed (they said,” The Federal Reserve) to respond. ”
This echoes Fed Chairman Jerome Powell, who last week dismissed signs of inflationary pressures in some parts of the economy as largely a consequence. ‘Transition factors’ Such as supply bottlenecks and the increase in pent-up spending.
To confirm their point of view, Gugnim economists have examined the short-lived effects of supply chain disruptions since the 1980s.
Referring to the chart above, they indicated that “high prices from supply bottlenecks in the manufacturing sector are usually short-lived,” the team wrote, adding that inflation pressures are also likely to be diminished by higher prices and the improvement in the COVID situation through the end of the year.
All of this likely means that the Fed may struggle to surpass its 2% inflation target as part of its recovery strategy, without “sustained inflationary pressures” coming from the large services sector, the team wrote.
US stocks, including the Dow Jones Industrial Average
And the S&P 500
It traded higher on Monday, despite a higher gauge of manufacturing activity, however It fell short of analyst expectationsAmidst supply chain bottlenecks and rising prices.
More to track …
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