UPJ professor: Vaccines key to bringing down inflation, improving supply chain

·3 min read

May 14—Price inflation is high, but vaccine needles could pierce that situation, a University of Pittsburgh at Johnstown professor said.

At the root of inflation is a global commodity price increase, Pitt-Johnstown Assistant Professor of Business Economics Guo Kai said.

But if the COVID-19 vaccine circulates, in particular around developing countries, he said, he believes that will have a direct influence on people rejoining the labor market, ramping up the global supply chain and bringing down inflation, as well as reducing infection rates.

April data reported by the federal government show he highest inflation since 2009. The Consumer Price Index for all urban consumers rose 4.2 % over the past 12 months.

By contrast, for much of the past 20 years, inflation was well under 2.5 %, Kai said.

"You can feel it," he said. "Even as we have learned months ago with toilet paper prices rising. But in the historical perspective, I wouldn't say this is very high."

'Very strong recovery'

The average inflation around 1975 was between 10% and 15% on an annual basis, he said.

The widely accepted starting point of the 1970s "stagflation" was the first oil crisis in 1972, as Arabic countries and Israel warred and there was an oil embargo to western countries.

But also since the 1970s, global supply chains have become robust and have protected against inflation by providing movement of goods from multiple countries.

April's inflation data doesn't make a trend, Federal Reserve System Gov. Christopher J. Waller said in a speech Thursday.

"Despite an unexpectedly weak jobs report, the U.S. economy is hitting the gas and continuing to make a very strong recovery from the severe COVID-19 recession," Waller said. "Let's remember — and this applies to latest inflation data, too — that a month does not make a trend. The trend for the economy is excellent."

Waller stressed also that despite the "unexpectedly high CPI inflation report" for April, "the factors putting upward pressure on inflation are temporary, and an accommodative monetary policy continues to have an important role to play in supporting the recovery."

Consumers have been bolstered by actions of central banks all over the world, Kai said.

"Keep in mind, all the central banks are pumping credits into the economy to stimulate it," he said "It's a pretty standard operation in dealing with economic crises. And when we have cheap credits, then guess what? These will lead to hopefully a booming economy. This is happening particularly in the real estate market."

Demand for houses in the Johnstown area is continuing to rise, said Robert Colvin, REMAX Team Realtors associate broker.

Once listed, a house sells in 10 days, especially in Richland Township or Westmont Borough, he said.

Additionally, listings are down 63% from this time last year, he said, as people who want to move within the region won't list their houses until they've found options themselves.

As as result of cheap credit on the market, there's a boom in the construction business, Kai said.

That has influenced the production and price of commodities, including lumber, he said.

Similar booms have resulted in supply issues across many industries, which still have fewer workers than before the pandemic.

"But the CDC has changed the guidelines for the pandemic," Kai said. "I believe everything will go back to normal. People will feel more relaxed and they will join the labor market.

"The vaccine is a very big factor, not just in the United States but also in developing countries. In that case, the supplying process will go back to normal, and in that case, inflation (will drop)."

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