Reopening or no reopening, people are going to be more cautious: David Rosenberg
Economist David Rosenberg said he agrees with North American monetary policy makers on one thing: concerns about runaway inflation are overblown.
“Take a look at newspapers around the world. The only hyperventilating about inflation is in Canadian newspapers, Canadian media and in the U.S.” said Rosenberg, chief economist and strategist at Rosenberg Research, in a broadcast interview Monday.
“In Asia and in most parts of Europe, underlying inflation is between zero and two per cent. We’re so interconnected globally, that inflation over time has been much more influenced by international developments than by homegrown developments.”
His comments come on the heels of U.S consumer price index growth that came in much hotter than expected for the month of June at 5.4 per cent year-over-year, the fastest pace since 2008. Meanwhile in Canada, consumer prices were up 3.6 per cent in May, said Statistics Canada, ahead of the Bank of Canada’s 2 per cent target.
Both Federal Reserve Chairman Jerome Powell and Bank of Canada Governor Tiff Macklem have defended the inflation figures at every opportunity, saying the run up in consumer prices is transitory, and Rosenberg agrees.
“It’s easily explainable as to what’s happening on the consumer price side,” said Rosenberg. “It’s disingenuous to believe that the supply side will not play catch up to the demand side.”
Numerous sectors, notably food service, have been dealing with supply chain problems as the economy reopens. Inflation data has also been skewed by so-called base effects, as prices for goods are being compared to volatile year-ago prices at the onset of the pandemic.
“I think in a year from now, the inflation numbers are going to have a minus in front of them.” said Rosenberg.
On consumer spending, however, Rosenberg did have one note of caution: while he doesn’t see either the Canadian or U.S. economy shutting down again in any meaningful way, he noted that consumers are becoming more nervous about COVID variants, and may decide to pull back spending and pad their savings.