- Consumer prices have hit a 39-year high in the United States.
- When inflation spiked in the spring/early summer of this year, it was largely due to the so-called base effect, caused by the pandemic’s cooling effect.
- But, questions are now being raised about whether the rise in prices is just a statistical blip or something more.
Consumer prices in the United States continued to rise in November, as inflation hit a 39-year high. The Consumer Price Index for All Urban Consumers (CPI-U) was up 6.8 percent compared to a year ago, while the core index excluding more volatile food and energy prices surged by 4.9 percent from November 2020 levels. Those were the highest readings since June 1982 and June 1991, respectively, fueling inflation fears that had long been downplayed.
When inflation spiked in the spring/early summer of this year, it was largely due to the so-called base effect, caused by the pandemic’s cooling effect on consumer prices a year earlier. At the onset of the pandemic, prices had taken a dive due to a sudden drop in consumer spending and fuel demand before slowly climbing back to their pre-pandemic trajectory over the summer and fall. Due to that initial dip in consumer prices, year-over-year comparisons were always going to be exaggerated this year, as last year’s prices were unnaturally low.
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So are inflation fears justified or is it still too early to ring the alarm bells? Back in April, the Federal Open Market Committee said that it was going to aim for "inflation moderately above 2 percent for some time" before raising interest rates to achieve a long-term average of 2 percent inflation. And while it’s unclear how the committee defines “moderately above” and “for some time”, its long-term goal of 2 percent inflation is clear.
How is the Forum helping to navigate global value chain disruption?
The world economy is facing a perfect storm of disruptive megatrends, ranging from the climate crisis to geopolitical tensions and emerging technologies. These are challenging the foundations on which global value chains are built. And while issues affect various industry sectors in different ways, there are unique opportunities for pioneers to build resilience and shape the supply chains of the future.
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The World Economic Forum has been working with a community of manufacturing and supply chain leaders to anticipate how manufacturing companies can best move beyond reactively responding to disruptive forces towards proactively building the right set of capabilities to ensure long-term and sustainable resilience.
This work has resulted in the co-development of the resiliency compass, a unique framework aimed at helping manufacturing organizations assess their current level of resilience across eight dimensions:
- portfolio excellence
- customer orientation
- financial viability
- go-to-market versatility
- logistics flexibility
- manufacturing adaptability
- supplier diversity
- advanced planning
Through our work across industries and geographies, we also identified five profiles of resilience leadership, reflecting distinct priorities and approaches to starting and navigating a resilience journey: the collaborator; the planner; the enhancer; the adapter; and the provider.
To further help firms build and implement new resilience efforts and roadmaps, a series of strategy playbooks were co-developed in close collaboration with members of the Platform for Shaping the Future of Advanced Manufacturing and Value Chains. These playbooks outline the set of actionable strategies employed by leaders within each resilience profile to fortify their value chain.
To eliminate the short-term effects of the pandemic, we calculated the average annual inflation rate over a moving three-year period, yielding a curve that fluctuated around 2 percent for a long time, until it took off this summer. In November, the three-year average inflation rate climbed to 3.3 percent, indicating that the latest spike in consumer prices is more than just a statistical blip and should be taken seriously.