The strength of demand coupled with supply constraints have made shortages of many goods even worse, with the inventory to sales ratio falling to a record low in March. The surge in job openings and share of employers saying they are struggling to fill those vacancies reveals that shortages are increasingly affecting the labour market too. While most of the surge in consumer prices in April specifically can be traced to sectors affected by shortages and reopening demand, there are signs of more lasting inflationary pressure beginning to mount in the background. With wage growth and inflation expectations also heating up, we are increasingly confident in our view that what started out as a largely transitory rise in inflation will become entrenched over the next few years.
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