A breakdown of the latest U.S. data shows that inflation is limited to specific sectors and it will not pose a challenge to the recovery, as per the opinion of Chief Economist at High Frequency Economics, Carl Weinberg.
U.S. CPI inflation increased at an annual 6.2% in October, its highest increase for more than 30 years.
The gains were led by energy, shelter, and vehicle costs.
The consistent high inflation and ongoing continuous pressures related to supply chain bottlenecks have caused many economists to question the central bank’s long-held perspective that the increase will be transitory.
But stronger-than-anticipated October industrial production and retail sales figures this week have showed that the broader recovery of economy may well be on the right track, even inflation is driving prices skyward.
Weinberg told on Wednesday, “With industrial output and GDP back to pre-pandemic levels, the U.S. economy has essentially recovered.”
Weinberg expressed, “We have a problem related to specific sectors of the economy, not the economy overall.”
He advised that the market should keep productivity increase in mind when looking at increase in inflation.
Referring aggregation of data by High Frequency Economics across sectors in the CPI reading, Weinberg estimated that around one third sectors are falling and half are growing at rate of less than 2%, which he termed as not inflation.
“The rise of selected categories, scattered categories of products within CPIs are making those averages of the basket price move higher, but that doesn’t mean that all prices are moving higher along with all wages,” Weinberg said.