While many economists predict prices will continue to rise in Wednesday’s June consumer price index (CPI) report, some are looking at sources of potential disinflation in the market. Will inflation go down next year?
Some analysts and experts predict accelerated price growth in June, bolstered by the soaring costs of energy and food. Indeed, Russia’s war against Ukraine and the resulting supply shortages has had wide-sweeping price effects. In the United States, consumers have watched gas and bread prices soar to their highest levels in decades. May’s CPI report detailed an 8.6% increase in prices compared to last year, the largest jump since 1981. Now, prices are largely expected to grow similarly for June.
Looking to the future, many believe prices will remain elevated through this year and into 2023. While the Federal Reserve has been aggressive in its monetary tightening, most of the anti-inflationary measures it has overseen take time to fully take effect. In addition, upward pricing pressure due to global supply-chain slowdowns is mostly out of the hands of regulatory bodies.
However, some experts have pinpointed a few areas and “anti-inflation” markers that could be a sign of things to come. Now, the Fed’s early statements about inflation being “transitory” appear not so baseless after all.
Will Inflation Go Down? 3 ‘Anti-Inflation’ Indicators
Michael Burry — the legendary investor of “The Big Short” — believes inflation may not linger as long as some expect. Burry predicts Americans will likely “exhaust” their savings by the end of this year. This will subsequently result in a drop in consumer spending, which will put pressure on retailers to slash prices. Burry also believes the Fed may ease off its aggressively hawkish agenda once it sees inflation start to cool.
Other experts, like Cathie Wood of Ark Invest, believe the excess inventory of many retailers may end up lowering prices. Lately, big-box stores like Walmart (NYSE:WMT) and Target (NYSE:TGT) have struggled with overstocked shelves. This has led to price-cutting in order to swap in new products. This same phenomenon may soon take root on a larger scale, especially if consumer demand falls.
Recent price declines for things like oil, timber and cotton have also provided analysts with a strong case for easing prices going forward. In a note to clients last week, Tom Lee of Fundstrat Global Advisors pointed to a possible “disinflation” trend being “underway.” Lee cited falling commodity prices and downward-trending home prices.
Finally, rumors are swirling that President Joe Biden and his administration may soon cut tariffs on Chinese imports. These Trump-era tariffs have long been a point of contention for many economists, especially U.S. Treasury Secretary Janet Yellen. If Biden goes through with the cuts, both domestic and international producers will see relief. This could mean lower costs for U.S. consumers.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.