Has Inflation Peaked?

Last week consumer confidence came in at its lowest level since World War II, as consumers have grown increasingly pessimistic in the face of high inflation. Looking ahead to this week, we’re watching three data releases that are important for markets: the ISM manufacturing index, home price inflation, and PCE inflation. Perhaps most importantly, we’re expecting to see core PCE inflation come down as supply chain pressures start to ease. Supply chain disruption was a key contributor to high inflation. During the pandemic, there were significant challenges with transporting goods globally, and as such container prices spiked. However, we’re now seeing container prices come down, which is a positive development from a supply chain and therefore an inflation perspective. The bottom line is we are still experiencing very elevated levels of inflation, but current data combined with supply chain improvements and declines in commodity prices provide reasons to be optimistic that inflation will decline in the months ahead.

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