The Weekly Brief
Thought of the week
Inflation is above 3% in the US, UK and eurozone. What happens to inflation from here is on the minds of investors, central banks and businesses. Inflation has been propped up by supply shortages, which may not ease imminently, in combination with a rapid recovery in demand. However, moderately higher inflation shouldn’t be a problem so long as demand remains healthy. So far, consumers have been resilient to price rises with rising wages and savings accumulated during the pandemic helping to keep consumer spending healthy. This week’s chart shows that a growing number of US small businesses are viewing inflation as a problem but unlike in the period prior to the 2008 recession, company sales aren’t a worry right now. As long as sales remain healthy, a bit of inflation tends to be a good thing for corporate profits.
Inflation concerns are rising but sales appear healthy
US NFIB survey, % of firms (three-month moving average)