Inflation: Persistent or Transient?

Inflation seems to be everywhere. Prices for lumber, plastic, oil, and other commodities are rising due to supply chain bottlenecks and worker shortages. Just as Covid became more manageable, many businesses have begun passing those costs to their customers.

With most of us feeling the sting of rising prices for gas and groceries over the past few months, you may be wondering if prices will continue to go up. With the recent surge in Covid immunizations, relaxing of Covid restrictions, and historic stimulus spending hitting our bank accounts over the past couple of months, that shot of adrenaline has hit the economy and we’re starting to feel its effects.

So where will inflation go from here? Will it continue its current trajectory upwards, or will it begin to moderate, and if so, when? The concern over inflation has been capturing news headlines for a few weeks. I’ve seen more market volatility after recent economic reports that indicate inflation might linger a bit longer than expected. My perspective, as a personal financial advisor, is that inflation in a growing economy can be a good thing. If businesses can pass on an increase in prices to offset their rising input costs and if they have enough excess profits to raise wages, they can attract higher-quality employees.  For now, most economic data points I watch are hinting that inflation may tame down later this year. After the pent-up demand from consumers has been spent, more people have returned to work full-time. Supply-chain issues have worked their way through the system, so hopefully it may calm down.