Food prices were up 1% from the previous month and 8.8% from the previous year.; energy prices were up 11% from the previous month and 32% from the prior year. Even if one focuses on “core inflation,” which excludes food and energy from consideration, there was still a 6.5% increase in prices.
The brunt of the price increases was lessened by an estimated 5.6% growth in wages. Still, inflation is rising faster than wages by around 50% should be very worrying to consumers and economists alike. John Lynch, chief investment officer at Comerica Wealth Management, believes company conference calls will give observers a sense of how inflation impacts business.
John Lynch commented on the situation, stating:
Many economists and analysts believe that runaway inflation could slow economic growth and rising unemployment rates, resulting in so-called “Stagflation.” A portmanteau of stagnation and inflation, stagflation refers to a situation where the economy is essentially at a standstill. Economic policies designed to combat inflation typically cause higher unemployment, while policies intended to reduce unemployment can increase inflation. This Catch-22 usually results in stagflation that can last for years.
For the world to avoid the worst stagflation, the underlying causes of rising inflation need to be addressed. Until the COVID-19 pandemic is well and truly over and Russian President Vladamir Putin ends his invasion of Ukraine, the world’s economy will be under threat.
Disclaimer: Wealthy VC holds does not hold a position in any of the stocks mentioned in this article.