Will US consumer price inflation hit another 40-year high?

U.S. consumer prices rose to another four-year high in December, ending a year of rampant inflation fueled by supply chain gridlock, labor shortages and robust spending.

Economists polled by FactSet expect the consumer price index to rise 0.5% month-on-month when the Bureau of Labor Statistics reports Wednesday. That would lift the CPI by 7.1% year-on-year, which would be the largest annual gain since February 1982. In November, consumer prices rose 6.8% year-on-year and 0.8% month-on-month.

Price gains accelerate for much of 2021, prompting Fed officials to ponder earlier and faster Interest rates rose as the central bank scrapped the economic support it implemented at the start of the coronavirus crisis.

Minutes of the Fed’s most recent policy meeting noted that supply chain disruptions and labor shortages could last longer than officials initially forecast, a further sign that high consumer prices are likely to persist even if inflation cools in 2022.

“As the conflict over the massive demand fueled by federal stimulus recedes, supply chain issues moderate, and inflation appears to be close to peaking,” said Brad McMillan, chief investment officer at Federal Financial Network. “As demand decreases and supply increases, we should See price changes start to normalize in 2022.”

Analysts at the Wells Fargo Investment Institute recently predicted that CPI inflation will average 5.3% this year as the Fed raises interest rates twice. Matthew Rocco

Will UK monthly GDP growth pick up before Omicron takes hold?

Before the Omicron coronavirus variant spreads to the country, Britain’s economic recovery is expected to accelerate in November, possibly reaching pre-pandemic levels for the first time since the crisis began.

Economists Bethany Beckett of Capital Economics and Ellie Henderson of Investec both expect the country’s gross domestic product to grow 0.5% in the October-November period when the data is released on Friday, marking the October Nearly stagnant momentum is building.

Supply chain disruptions that hampered manufacturing production in October “remained widespread in November, easing just a little bit,” Henderson said. However, she believes “mining, quarrying and utilities should have seen some rebound” and that construction output “could recover partially after falling in October”.

Output in the services sector is also expected to accelerate to 0.5% in November as people return to work and city centres, and Christmas shopping comes earlier.

If such forecasts are confirmed, the monthly measure of UK GDP could return to its highest level since February 2020.

But momentum appears to be slowing temporarily in December, as the spread of Omicron could hinder or disrupt certain areas of economic activity even without legal restrictions. Output could shrink by about 0.8% in December as coronavirus infections surge, Beckett said.

“Not only does demand appear to be affected by the growing number of Omicron cases, but staff shortages are disrupting production in some areas,” Henderson said. Valentina Romee

What’s next for European gas prices after December’s wild ride?

Even in a year in which a rebound in the global economy and supply constraints drove an unprecedented rise in global natural gas prices, December was a stellar month.

In the week before Christmas, futures contracts linked to wholesale gas prices in Europe had hit record highs, soaring above 180 euros a megawatt-hour, as lack of confidence in Russian supplies softened.

An LNG ship originally bound for Asia changed course mid-voyage, and that’s the strength of the rebound. In total, an estimated 7.3 million tonnes of LNG was shipped to Europe in December, according to consultancy Rystad Energy.

Imports played a role, aided by a warmer-than-expected weather forecast. By January 4, European prices had stabilized at around 90 euros per MWh, but were still around 350% higher than a year earlier.

The volatility is unlikely to end anytime soon. Rystad predicts that gas flows from Russia to Western Europe will continue to weaken amid ongoing problems in Ukraine, leading to “sustained price increases”.

Meanwhile, storage levels in Europe remain low, leaving the continent with little wiggle room as it watches weather forecasts for any signs of a drop in temperatures.

In Asia, the outlook is less worrisome, where several countries have large LNG inventories and temperatures are now forecast to be at or above normal in the coming weeks. Tom Wilson