Supply chain adjustment supporting beginning of the end of inflation spike

“Inflation fell in both the UK and the US in November, according to data out this week. Euro inflation is also expected to fall. But this is hardly surprising.

“We have been predicting falls in inflation for some time and expect much further falls next year – adjustment in the supply chain makes this inevitable,” says Oliver Chapman, CEO of supply chain specialists and the UK’s No.1 fastest growing company in 2022, OCI.

Mr Chapman adds: “Look at the cost of lumber, oil, used cars and freight.

“We have been saying for a while now that adjustments in the supply chain have made it inevitable that inflation would fall, with or without increasing interest rates.

“The lumber price is now at its lowest level since the spring of 2020. In the US, used car prices have fallen to their lowest level in a year, and Brent crude oil is hovering close to a year low. Meanwhile, freight costs continue to fall.

“Up until recently, a case could have been made to suggest that the falling cost of many of these indicators was partly down to the strength of the dollar because, for example, lumber and oil are measured in dollars. But in recent weeks, both the pound and euro rose against the dollar.

“Meanwhile, in the US, the money supply growth is at a 37-month low.

“At a time of exceptionally high levels of private sector debt, it is clear that higher interest rates and slowing growth in the money supply will have grave economic consequences. But supply chain adjustments were, in any case, going to lead to falling inflation.

“We expect supply chain adjustments to continue and inflation to be back to modest levels by the end of the year. Indeed, deflation is not a remote possibility. Higher interest rates are not necessary to achieve this, but do risk creating a more severe recession than is necessary.”