With new dwelling commencements falling to a 11-year low, some commentators have raised concerns that a lack of housing supply will fuel a resurgence in inflationary pressures. However, we're not convinced. With pandemic-era bottlenecks receding, firms are making rapid progress on the large pipeline of residential projects. Moreover, even if the housing shortage were to keep shelter inflation elevated, it need not upend the overall inflation outlook. Indeed, labour market data suggest that productivity growth will pick up over the coming quarters, helping to ease unit labour cost growth and, in turn, services inflation.
Note: We’ll be be discussing China’s missing stimulus, the Asian monetary policy outlook and much more at our Asia Drop-In on 25th January. Register here for the 20-minute online briefing.
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