Twelve months ago, many economists predicted that inflation would slow down, and consumer spending would increase as supply chain issues stabilised while pandemic relief cooled. They were largely wrong and are predicting the same for 2023 but should we believe their predictions this time?
While economists aren’t as optimistic as they were during December 2021, they do see inflation slowing significantly in the months ahead. One reason for positive predictions is the hope that supply chain disruptions the world over will finally come back into balance as consumers shift from goods to services spending.
The problem with forecasting inflation is that many inflation drivers come as a surprise or bring shock to an economy. The Russian invasion of Ukraine that caused a surge in oil and food prices could not have been accounted for by economists twelve months ago.
Similar geopolitical events next year may well throw a curveball in the forecaster’s predictions.
Source: New York Times
