Glimmer of hope despite sharp rise in US inflation

Inflation in the US rose sharply in September, but there is at least some hope that as the supply chain adjusts, inflation will fall later next year, according to Oliver Chapman, CEO of supply chain specialists OCI. Chapman said: 

“What is especially disappointing about the latest data on US inflation is that it surged to 8.2 per cent in September despite energy prices falling 2.1 per cent on the month before. With US core inflation hitting a 40-year high, the latest data is gloomy indeed, but there are reasons to expect US inflation to fall later in 2022 and quite sharply. It takes time for the supply chain to adjust to one-off shocks, but there are indications this is happening. Lumber, oil, gas, copper, iron and DRAM are among the commodities to see sharp falls in recent weeks. In addition, shipping and used car costs have also fallen significantly. Providing these falls don’t reverse, there should be a significant knock-on effect down the line, helping to reduce core inflation sharply. Unfortunately, supply-side adjustments are not the only reason to expect inflation to fall next year. Rising interest rates at a time of high private-sector debts will probably lead to a contraction in demand. This contraction will help reduce inflation but may create a recession in the process.”