ARK chief executive Cathie Wood is firmly on the side of the debate that believes the current surge in inflation will likely be short-lived. In a series of Twitter exchanges on Tuesday with the likes of Jack Dorsey and Elon Musk, she explained the deflationary forces that will help quell the pickup in price pressures, including the role of technology.
Supply-chain bottlenecks at ports, warehouses and rail depots around the world that built up during the worst of the Covid-19 lockdowns, along with shortages of labor and raw material prices have sent the cost of consumer and producer goods and services to multi-year highs.
Central bankers face a delicate balancing act of curbing excessive price increases without dampening economic growth, which in many cases, is still below pre-pandemic levels.
On Monday, Wood took to Twitter to detail three deflationary forces that will “overcome the supply chain-induced inflation,” responding to Jack Dorsey less than 72 hours after he sounded an alarm on rising prices.
Tesla chief executive Musk weighed in. “I don’t know about long-term, but short-term we are seeing strong inflationary pressure,” he tweeted in reply to part of Wood’s thread.
“Inflation has flared in response to COVID-related supply chain bottlenecks and oil supply constraints but, IMHO (in my humble opinion), the powerful and converging deflationary forces associated with AI, energy storage (EVs!), robotics, genomic sequencing, and blockchain technology will bend the curve,” Wood said in response to Musk.
“If they expect lower prices, most consumers/businesses will defer purchases, exacerbating a decline in the velocity of money. Despite the burst in cyclical inflation during the last year, velocity is hovering at low levels. If ARKInvest is correct, the next leg will be down,” she continued.
She pointed to the decline in velocity – the rate at which money turns over per year – and how that will also help offset inflation.
“I am struck by the behavior of millennials who, at the margin, are sacrificing short term consumption to pay down student loans or invest in crypto and other assets. Bank loan growth also is tepid which would not be the case if velocity were increasing,” she said.
Container ships wait off the coast of the congested ports of Los Angeles and Long Beach, in Long Beach, California, U.S., September 29, 2021.
Mike Blake/REUTERS
The global supply-chain crisis is already easing ahead of the spending-heavy holiday season, Jefferies said.
There are signs “we are past peak pinch,” and “significant improvement” will arrive by the middle of 2022, the bank added.
Still, US-China tensions and overwhelming demand stand in the way of a swift recovery.
The shipping mess that’s making online orders a nightmare is already healing, Jefferies economists said Friday.
There are signs that “we are past the peak pinch” on the cargo ship delays, port bottlenecks, and labor shortages that have disrupted worldwide supply chains for months, according to economists led by Aneta Markowska. The team anticipates the global supply chain will see “significant improvement” by the second half of 2022, with Octoberlikely marking the peak of the problem.
“Between shipping costs, labor shortages, raw materials, and input availability, the global supply chain has been stretched remarkably thin,” the economists said, adding “we may be already witnessing the worst of it.”
The team expects a rebound once the holiday shipping window closes in mid-October, with improvements will first emerging in “baseline” shipping, or less time-sensitive transportation. Concerns and disruptions for regular goods should improve soon after.
Reviving the supply chain won’t be easy
Still, supply faces a steep uphill climb before it matches demand. Spending is still close to pandemic-era highs in many categories despite decade-high inflation, Markowska said in the Friday note. Americans’ spending at retailers and restaurants jumped 0.7% to $625 billion in September, trouncing the median estimate of a 0.2% decline. US virus case counts have only declined since, signaling spending at in-person venues could climb even higher in October.
That, coupled with shipping bottlenecks, should intensify shortages during the holiday season, but as they wind down and seasonal trends push more activity toward services, supply chains can heal faster, she said.
US-China tensions could also hamper shipping recovery
President Donald Trump started the process of decoupling the US and China supply chains, arguing it would benefit American manufacturers and help the US catch up in the global economic race. Yet billions of dollars in tariffs were largely passed down to consumers, and both countries’ economies remain reliant on each other.
That’s made the supply-chain disaster worse. Trump’s trade war has contributed to shortages of key products like semiconductors. That’s already slowed US car production, worsened electronics shortages, and boosted inflation throughout the economy.
Despite the current shipping issues, the Biden administration has maintained the Trump-era playbook. And new pandemic-era trends are making matters worse, Sean Darby, global equities strategist at Jefferies, said. China’s shortages and lack of investment in production have further slammed its ability to shore up supply. Disappointing vaccine rollouts in other manufacturing hubs like Vietnam have kept alternatives from picking up the slack.
Still, the headwinds shouldn’t delay recovery too long, the bank said. The supply-chain crisis’s impact will ease considerably through the start of next year. So while this year’s holiday shopping might be more difficult than usual, it should be back to normal by winter of 2022.
The shipping industry is currently in chaos, with ports in Southern California being especially hard hit.
Reuters/Alan Devall
The Port of Los Angeles will start processing ships 24/7, the White House said.
The shipping industry is currently in chaos, causing product shortages and soaring prices.
Ships are currently stuck off the California coast, waiting to get into port.
The Port of Los Angeles is starting to process ships 24/7 to help ease a massive backlog, the White House said Wednesday.
The port was adding new off-peak night shifts and weekend hours, the White House said in a press release. The new hours would almost double the number of hours during which cargo can be moved, it said.
The shipping industry is currently in chaos, with ports in Southern California hit especially hard. At the Port of Los Angeles alone, ships carrying nearly 500,000 shipping containers – or about 12 million metric tons of goods – were waiting in drift areas and at anchor on October 5 for spots to open up so that they could dock and unload.
On Tuesday, there were 80 ships at anchor or drift areas and 64 at berths across both the Ports of Los Angeles and Long Beach, according to the Marine Exchange of Southern California. “The normal number of container ships at anchor is between zero and one,” Kip Louttit, executive director of the Exchange, told Insider in July.
The White House said that the International Longshore and Warehouse Union, which represents port workers, had agreed for its members to work longer hours.
President Joe Biden is set to hold a virtual meeting Wednesday to discuss the supply-chain chaos, with expected attendees including executives from UPS, FedEx, Walmart, the US Chamber of Commerce, Teamsters, and the American Trucking Association, as well as the executive directors of the Ports of Los Angeles and Long Beach, CNBC reported.
The Ports of Los Angeles and Long Beach together account for around 40% of all shipping containers entering the US, as well as around 30% of all exports. In September, the Port of Long Beach switched to 24-hour operations between Mondays and Thursdays, and its executive director said that the industry was in “crisis mode.”
Multiple factors are causing the problems, including a surge in demand for goods, labor shortages at ports, and COVID-19 related port closures.
The world’s second-largest meat processor says it will keep raising its prices.
In its third quarter, which runs to July 3, Tyson Foods hiked up its average price for pork by 39%, beef by 12%, and chicken by 16%, it said Monday.
CEO Donnie King said during an earnings call that the company planned to raise prices for retailers again next month to cope with higher costs – he estimated that “unprecedented inflation” reached 14% in the quarter.
“Costs are hitting us faster than we can get pricing at this point,” King said.
“We will continue to take price to match the nature of the cost that’s coming to us,” he added.
King said that Tyson was forced to raise prices in the quarter because of rising costs of animal feed, packaging, and freight. The company is also spending on COVID-19 expenses, and on higher wages during the labor shortage.
In the third quarter alone, chicken feed ingredients cost $270 million more than usual, Stewart Glendinning, the company’s chief financial officer, said. The company also spent around $55 million on COVID-19 expenses, he added.
“Labor is our single biggest issue we face,” King said. This stemmed largely from the spread of the Delta variant, he said.
“We are more inefficient than we have historically been,” King said. “Essentially it takes us six days to get five days worth of work.”
King said that Tyson had increased wages, created flexible shifts, and added childcare facilities on-site to attract more workers. He added that the company was investing more in automation and technology to eliminate more difficult, hard-to-fill tasks, and shift available workers to “more value-added activities.”
Tyson announced last week that it was mandating COVID-19 vaccines for its entire US workforce by November 1. It said that nearly half of all staff have been vaccinated so far.
Tyson said in its earnings release that there had been strong global demand for meat, which allowed it to sustain the higher prices. The company said that its third-quarter sales were up nearly 25% year-over-year to $12.5 billion, and its net income increased 43% to $753 million.
Vaccination may be keeping COVID-19 at bay, but the pandemic’s fallout lives on in supply shortages and labor scarcity, the Federal Reserve said Friday.
March stimulus, vaccination, and the reversal of pandemic restrictions allowed businesses to reopen and unleashed a wave of consumer demand through the first half of the year, but these combined to make inflation the new specter looming over the US. Prices climbed at their fastest rate since 2008 in May, and much of this overshoot is linked to supply bottlenecks and the nationwide labor shortage, the Fed said in a new report.
“Shortages of material inputs and difficulties in hiring have held down activity in a number of industries,” the central bank said. Still, accommodative fiscal and monetary policy helped the US achieve “strong economic growth” through the first half of the year, the Fed added.
The Friday report sheds more light on just how high the Fed is willing to let inflation run before taking action. Recent measures of nationwide price growth are “in a range that is broadly consistent” with policymakers’ long-term goal of inflation averaging 2%, according to the report. Bottlenecks affecting products like used vehicles and appliances can provide “more lasting but likely still temporary upward pressure” on prices, the Fed added.
The Fed also provided new detail on how it expects the labor market to reach its goal of maximum employment. Unemployment remains elevated, and labor force participation has been flat in recent months as Americans remain on the sidelines. It’s possible the COVID-19 recession and the resulting worker shortage will have “long-term effects on the structure of the labor market,” the Fed said.
“The pandemic seems to have accelerated the adoption of new technologies by firms and the pace of retirements by workers. The post-pandemic labor market and the characteristics of maximum employment may well be different from those of early 2020,” the central bank added.
Fed Chair Jerome Powell is scheduled to present the report to Congress on Wednesday and Thursday.
Shelves with toilet paper and disinfecting wipes are nearly empty at a Pavilions supermarket in South Pasadena on March 11, 2020 in Los Angeles, California.
Dania Maxwell / Los Angeles Times
April’s dismal job growth is similar to the commodity shortages plaguing US businesses, JPMorgan said.
Average wages swung higher in April as firms raised pay to attract workers.
That increase is “consistent with constraints” in hiring and mirrors rising prices for key materials, the bank said.
Businesses’ need for workers similarly rebounded as firms look to service outsize consumer demand, but the US added only 266,000 jobs in April, a sharp deceleration from the job growth seen in March and a big miss of the 1 million-payroll estimate. Yet average hourly earnings surged through the month and the average workweek grew longer as businesses converted part-time employees to full-time work.
These developments are “consistent with constraints” in the labor market, rather than a lack of demand for workers, JPMorgan said.
“We had anticipated bottleneck pressures this year, but signs of similar constraints in US labor markets is a surprise,” the team led by Bruce Kasman said in a note to clients.
Economic data published Tuesday morning supports such claims. The country ended March with a record 8.1 million job openings, according to the monthly Job Openings and Labor Turnover Survey. The hiring rate climbed slightly, and about 1.2 Americans competed for every job opening. Although April JOLTS won’t be released for another month, the March figures suggest businesses were ramping up hiring efforts as the economy continued to reopen.
The rising commodity prices also point to another pressure plaguing the labor market. Experts including Federal Reserve Chair Jerome Powell suggested before the report that a jump in average wages would be indicative of a worker shortage. If wages need to climb to accelerate hiring, the combination of higher labor and materials costs could further boost inflation and create new economic worries.
JPMorgan, for now, sees such bottlenecks fading as the recovery charges on. Sustained policy support and strong economic growth should drive more Americans into the workforce. This should, in turn, alleviate some manufacturing pressures and help producers address their massive order backlogs.
The bank isn’t alone in its optimism. The expiration of bolstered unemployment benefits and the start of the school year will push more Americans to job openings, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday.
The creation of new businesses can also offset permanent job losses. While April job data was hugely disappointing, it still seems as though the labor market will emerge without the long-term scarring many feared, Nobel prize-winning economist Paul Krugman said Wednesday.
“People seem to be eager to go back to work. Not enough to make companies that don’t want to pay higher wages happy. But this whole thing is really looking like a V-shape recovery,” he told Insider.
Senate Minority Leader Mitch McConnell on Thursday faulted the Biden administration for approving stimulus benefits, and claimed they are hurting the nation’s economic recovery.
“We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” McConnell said from Kentucky. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”
He went on: “So we have a workforce shortage and we have raising inflation, both directly related to this recent bill that just passed.”
McConnell’s comments reflect longstanding GOP concerns about disincentivizing people from returning work as a result of issuing direct payments and federal unemployment benefits. Democrats approved a massive $1.9 trillion stimulus package in March, arguing many households needed immediate financial aid from the government.
No Republicans voted for the relief package. The unemployment rate has steadily fallen to 6%, and new claims have dropped for four weeks in a row.
But employers are growing alarmed over worker shortages, particularly those in the restaurant sector, while shortages of commodity goods are causing massive price increases in certain pockets of the economy. The trends caused the White House to defend its policies on Thursday. White House Deputy Press Secretary Karine Jean-Pierre said there was “little evidence” that enhanced unemployment insurance was enticing people away from work.
Some economists note that a key feature of a labor shortage – rising wages – is not in evidence, as businesses typically take that step to lure job-seekers from a scarce pool.
“When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market,” Heidi Shierholz, economist and director of policy at the left-leaning Economic Policy Institute, wrote on Twitter. “And right now, wages are not growing at a rapid pace.”
Federal Reserve Chairman Jerome Powell weighed in on the issue last week at a press conference. He said potential factors that could explain the shortage include a lack of childcare, lingering COVID-19 fears, and school closures.
“We don’t see wages moving up yet. And presumably we would see that in a really tight labor market,” Powell said. “And we may well start to see that.”
Computer chipsPresident Joe Biden holds a semiconductor chip at the White House in Washington, U.S., February 24, 2021.
Jonathan Ernst/Reuters
An ongoing computer-chip shortage has affected cars, iPads, and dog-washing technology alike. Chipmakers like Intel had already seen production issues pre-pandemic, but as with many industries, COVID-19 brought a variety of new supply-chain issues. The chip shortage is a problem for consumers wanting basically anything with a computerized component, which is much of the economy. Take cars as an example.
The semiconductor shortage has hit automakers the hardest. In January, the consulting firm Alix Partners estimated the automotive industry would lose $61 billion in revenue from the shortage this year. As Insider’s Katie Canales reported, demand for chips has gone up as consumers scrambled to buy cars and other technologies that use them.
But as more cars went into production, chip competition went up. Since then, many carmakers have been forced to shut down plants and prioritize which models they produce, while car prices at dealerships have continued to go up.
Last week, Tesla CEO Elon Musk said the semiconductor shortage has caused “insane difficulties” for the electric carmaker. Even Apple — a company that many thought would be able to dodge the shortage after it started making its own high-powered computer chips last year — said it will delay production on its iMac and iPad.
Used cars and rental cars
Jose Luis Pelaez Inc
Buyers are still looking for vehicles, creating a competitive used-car market. As USA Today reported, used-car prices are on the rise as the aforementioned chip shortages affect new-car production, and buyers have turned to older ones instead, while Axios reported the average price of a used car has hit $17,609.
A UBS note estimated that in April, used cars saw their largest monthly price increase in 68 years of tracking, with prices rising between 8.2% and 9.3%.
If you’re looking to rent, you might also be out of luck: Insider’s Brittany Chang reported on the “perfect storm” hitting rental cars right now, with prices surging and demand increasing. Americans are itching to go on vacation this summer, as more people are vaccinated and some restrictions loosen. That’s leading to far more demand — but rental-car companies had sold off parts of their fleets early into the pandemic, leaving fewer cars to go around.
It’s not all bad news for used-car lovers, though: As USA Today reports, the trade-in market is hot, too, meaning your old car could be worth more right now.
Demand for fuel and interest in travel has risen as vaccination rates have increased. Lower gasoline-production rates have also made the commodity more valuable, as OPEC has been slow to curb production cuts.
Gas prices have skyrocketed in recent months, jumping 22.5% in March from the previous year, according to the US Bureau of Labor Statistics’ Consumer Price Index. Much of the surge in gas prices started with the extreme Texas freeze, which halted a fifth of the country’s oil-refining capacity in its tracks for weeks at a time.
Plastics and palm oil
aydinmutlu/Getty Images
The devastating winter storms in Texas also left their mark on the plastics industry. As Insider’s Natasha Dailey reported, the state is a key plastics exporter — and the storms made many plants, which are difficult to reactivate, press pause.
According to the Financial Times, rising plastic prices have led to an increase in packaging costs. Citing data from Mintec, the Financial Times reported that those costs have increased by nearly 40% from the start of 2020, marking “historic highs.”
Palm oil, which is in a majority of those packaged products, also saw its prices climb, according to the Financial Times. That’s due to yet another labor shortage; the industry had already been contending with finding more sustainable production methods.
Trucking
A contract port truck driver, Giraldo has seen work dry up as imports slow during the coronavirus outbreak. He gets fewer than four hauls a week, compared with at least 12 in normal times.
AP Photo/Marcio Jose Sanchez
The Wall Street Journal reported that increased shipping demand has combined with a lack of drivers and trucks to result in climbing shipping costs.
In September, Insider’s Rachel Premack reported that pay for truck drivers was on the rise, coming in at “record-smashing levels.” But the pay hike — and increased demand — comes after an exodus of drivers in 2019; Premack reported at the time on what some called a “trucking bloodbath,” as trucking companies saw profits fall, with some even going bankrupt.
Now demand is surging, according to The Journal, and if everything continues as is, that gap could deepen.
Homes and vacation houses
A house’s real estate for sale sign shows the home as being “Under Contract” in Washington, DC, November 19, 2020.
Saul Loeb/AFP/Getty Images
The US was facing a shortage of 3.8 million homes as of April, according to Freddie Mac. Home builders have been struggling to keep up with demand as remote work fuels interest in spacious housing, with house prices rising at their fastest pace in 15 years, The Wall Street Journal reported. Lumber prices are also driving the cost of new homes even higher.
Even vacation-home rentals are at an all-time high. A house in the Hamptons rented for $2 million this summer, and 85% of vacation rentals in popular destinations like Cape Cod, the Outer Banks, and the Jersey Shore are booked through August, according to the rental site VRBO.
Lumber
Justin Sullivan/Getty Images
If you’re wondering why the houses around you are getting more expensive, look to their component parts. No, seriously: Lumber prices have soared, and, as Insider’s Ayelet Sheffey and Libertina Brandt reported, builders are even increasing house prices in an attempt to offset demand.
It’s due to another pandemic disruption, as lumber mills were forced to temporarily close for safety concerns. When they reopened, they couldn’t keep up with a scorching-hot housing market, goosed by a work-from-home economy, record low mortgage rates, and the need for personal space during the pandemic.
According to an April analysis from the National Association of Home Builders, soaring lumber prices added $36,000 to the cost of a new home. Lumber prices “remain stubbornly high,” according to the report, due to mills shutting down, unexpected demand from big-box retail and DIY-ers, and tariffs imposed on Canadian lumber.
Household products like toilet paper and tampons
Kathrin Ziegler/Getty Images
Many household goods including toilet paper, diapers, and tampons are also facing supply problems.
One of the biggest producers of the pulp used to create toilet paper told Bloomberg that port delays and high shipping costs are causing companies to push delivery dates back months.
The work-from-home lifestyle helped the furniture industry boom but to such an extent that customers are seeing delivery dates that are months out.
In February, La-Z-Boy executives said customers could expect delivery dates that are five to nine months out from their order dates. Other furniture companies like Kasala, a Seattle-based chain, said they don’t expect to get furniture parts until at least December.
The furniture shortage has been exacerbated by a spike in homeownership, as the number of available and unsold homes sits at record lows. In other words, a lot of new homeowners are waiting a long time for their new living-room sets.
Chicken
AP Photo/Matthew Mead
If you’ve been having trouble finding chicken wings, you’re not alone: They’re hard to come by as supply tightens. Insider’s Avery Hartmans reported that chicken-wing supply is dwindling while prices rise. It’s due in part to increased demand and shortages caused by devastating winter storms in Texas.
The Washington Post reported that shortages go beyond just wings, with all chicken harder to get ahold of. One phenomenon The Post notes: Fried chicken sandwiches, which have gained viral popularity in the past few years. McDonald’s has even launched its own. Insider’s Mary Meisenzahl reported that the KFC Nashville hot chicken has been so popular on TikTok that the chain is running out of the hot sauce for it.
Bacon and hot dogs
Getty
Bacon and hot dogs will likely be in short supply this summer.
The pig shortage dates back to the onset of COVID-19 and outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020. As vaccination rates pick up and people prepare for summer vacations and cookouts, analysts told Insider’s Natasha Dailey demand will outstrip supply.
With pork companies still struggling to overcome lower production rates in 2020, the matter only intensified when high instances of disease hit the hog population this past winter.
Some companies are already seeing the impact on their shelves. In March, Costco said its supplies of cheese, seafood, and olive oil were running low.
General Mills said it has been forced to raise prices due to the delays increased shipping costs. Coca-Cola also raised prices to combat the supply-chain crunch. Neither company specified which products would be affected.
Coffee has also been hit by delays, Bloomberg reported in March. Peet’s and JM Smucker, the brands behind Folgers and Dunkin’ coffee, have said they’re facing rising costs. Reuters reported that in February, port delays pushed coffee prices to their highest point in more than a year.
Chlorine
Chlorine can kill germs, but alcohol is more effective.
Bill Oxford/ Getty Images
This summer pool owners will see the worst chlorine shortage in US history, according to CNBC.
Supplies of the chemical have been strained since a fire at the chlorine manufacturer BioLab in Louisiana in September. The price for chlorine used in pools has nearly doubled this past year and is expected to rise even more to meet demand this summer.
Insider’s Annabelle Williams reported that pool owners could help avoid the shortage by resorting to saltwater pools.
Corn
Cyndi Monaghan/Getty Images
Corn is a key crop for many products, including fuel and different foods. As supply concerns loom, corn prices are popping off, according to Axios.
There’s a few reasons that demand is so high: After an outbreak of swine fever in China, pig herds were “decimated,” according to Axios, leading to huge corn demand in China. That spike in demand is coupled with corn crops in Brazil and Argentina experiencing both bad weather and pandemic-related labor shortages.
Now corn prices are on a record-setting clip, rising by 16% in April alone.
And, as Fortune reported, there could be a domestic supply issue too. Droughts and a rough winter are both concerning — and if American crops can’t fill in the gaps, prices could rise even more.
Labor
AP Photo/Nam Y. Huh
Finally, a commodity unlike all the others is in surprisingly short supply: workers.
Major labor shortages are hitting businesses across America. As Insider’s Kate Taylor reported, chains like Dunkin’ and Starbucks are struggling to find workers — leading to reduced hours and hesitance on opening indoor dining back up.
There’s a few possible reasons that unemployed workers are opting not to return, according to Insider’s Ayelet Sheffey. They include workers making more on unemployment benefits than in their prior work as well as continued concerns over COVID-19 and the need to provide childcare at home.
As Insider previously reported, female tipped workers experienced lower tips and increased harassment during the pandemic.
One potential solution for ending this shortage, according to Taylor? Paying workers more.
The latest commodity seeing a price squeeze amidst shortages and high demand is used cars.
A note from UBS researchers led by Alan Detmeister found that not only did used-car prices climb in April, but the monthly price increase could be the largest in 68 years of tracking. It looks like prices may have risen by 8.2% to 9.3%.
Used cars have been in high demand due to a few of the factors driving the shortages all over the American economy. The economy is reopening, people are ready to spend money (perhaps from new stimulus checks), and they want cars – especially as more suburban areas boom with wealthy transplants. But new cars are being hit by a computer chip shortage that’s hitting the automotive industry hard.
As Insider’s Grace Kay reported, semiconductor shortages could cost automakers billions, and has already led to lower production rates for new cars. Even Elon Musk has said that Tesla’s suffered from supply chain and semiconductor woes. Cue a used-car boom, with the market heating up and trade-ins fetching higher prices.
Chart via UBS Evidence Lab.
UBS Evidence Lab
According to UBS, prices on used cars may only climb in the coming months, due to a lag in wholesale to retail pricing. New car prices are also likely to pick up, increasing by 1%.
Why there are so many shortages, and which ones may pick up next
It may seem that everywhere you look, a new product is in a shortage. Chicken, diapers, corn, gas, furniture: The list of shortages goes on, and will likely only grow amid economic reopening. That’s due to some of the same factors impacting used and new cars. Supply-chain issues have persisted throughout the pandemic, and factories shuttered for safety reasons need to crank back to life as demand steepens.
The climate crisis also has a role, with several domestic products in the US – such as plastic and gas – impacted by factors including the devastating winter storms in Texas. Droughts are impacting the worldwide corn supply amidst high demand; Insider’s Will Daniel reports that corn prices have jumped 142% in the past year.
UBS projects 12-month headline Consumer Price Index (CPI) inflation rising to 4.3% from 2.6%, “an enormous surge over just the past few months.” Economists’ median estimate for April CPI is 3.6%, per Bloomberg.
Chart via UBS Evidence Lab.
UBS Evidence Lab
UBS projects hotels and airfares will be next to see substantial price increases. Axios reported – in an article aptly titled “Our crazy, booked-up summer” – that summer travel in the US is about to boom, with a particular emphasis on domestic travel.
A recent report from the US Travel Association found 72% of Americans are planning a summer vacation in 2021; that’s compared to 37% last year. That probably won’t help the already intense rental car shortage.
