US: Inflation could persist in 1H 2022 – UOB

"Further US inflationary pressures could persist in 1H 2022" says Alvin Liew, Senior Economist at UOB Group, commenting on the latest US inflation figures.

Key Takeaways

“The latest US CPI data showed consumer price inflation surged further by 0.5% m/m, 7.0% y/y in Dec (from 0.8% m/m, 6.8% y/y in Nov), at a new record y/y pace since Jun 1982 (7.2% y/y). Core CPI (which excludes food and energy) also rose by 0.6% m/m, 5.5% y/y, from 0.5% m/m, 4.9% y/y in Nov, the highest y/y print since Jun 1991 (4.96%) The inflation outcome again did not surprise the markets as it was quite close to expectations.”

“The headline and core CPI inflation were not only higher in Dec but were also seen as spreading price pressures further among the main categories within the CPI basket.”

“Further US inflationary pressures could persist in 1H 2022 due to the confluence of a range of factors driving up prices that will take time to resolve (such as logistics bottlenecks and supply disruptions, amidst recovering demand) before turning lower in 2H. While we keep our 2022 CPI inflation at 3% and the core CPI inflation forecast at 2.5% for now, we recognise the need to upgrade the numbers if the Omicron variant of COVID-19 does materially disrupt supply chains, worsen logjams and labor shortages, all of which will inevitably add further price pressures to the US and the broader global economy.”