Bleak outlook on inflation

The nation’s business economists have sharply raised their forecasts for inflation, predicting an extension of the price spikes that have resulted in large part from bottlenecks in supply chains.

A survey released Monday by the National Association for Business Economics found that its panel of forecasters expects consumer prices to rise 6% this quarter compared with a year ago. That marks a hike from the 5.1% increase the forecasters predicted in September for the same 12-month period.

Nearly 60% of the NABE panelists expect the job market to reach full employment over the next year. Two-thirds of the panelists said they think wage gains will keep inflation elevated over the next three years.

On Friday, the government reported that the unemployment rate tumbled to 4.2% in November from 4.6% in October. The NABE panel expects the unemployment rate to keep declining to 3.8% by the end of 2022.

The forecasting panel expects the overall economy, as measured by the gross domestic product, to expand by 5.5% this year. That would mark a robust bounce-back from the 3.4% drop in GDP last year, when the economy was derailed by nationwide shutdowns caused by the eruption of the pandemic. Next year, the NABE forecasters expect GDP to grow by a still-solid 3.9%.

Addressing the snarled supply chains that have hobbled the economy this year, a majority of NABE panelists (58%) say they think the flow of goods will begin to normalize in the first half of 2022. Twenty-two percent say they think that process has already begun.