Inflation Could Lead To Inventory Surplus in 2022
In the wake of recent price hikes, some people are starting to feel like there is no end in sight for inflation. But current economic trends could lead to a glut or oversupply for furniture, cars, appliances, and other goods next year, thanks largely due to an increase in prices which saw double-digit gains last month.
Vehicle prices continue to rise as the lack of new vehicles makes it difficult for rental car companies. As a result, there are fewer cars available, which drives costs up 49%. The cost-effective way to buy used cars is also more expensive now at 44%.
Auto, Retail Undersupply Could Ease
While it may seem like inflation is here to stay, even small improvements in the supply chain could have a big impact. The automotive industry has many half-built vehicles waiting for semiconductors and other components that are needed before they can be assembled into cars or trucks. Some car companies are hoarding parts to prevent shortages in the future, which will make demand appear higher than it really is. Once they install these extra supplies, though, they might end up with oversupply.
While many retailers are encouraging consumers to start their holiday shopping early, last week they announced that they have enough inventory for the upcoming Black Friday event. This could lead stores like Walmart, Target, and TJMaxx to have excess stock if shoppers have already finished buying their gifts.
Fewer COVID-19 Cases Could Lead to Prices Drop
With the help of antiviral pills and vaccine boosters, the number of COVID-19 cases might drop down, together with the inflation rate. This could lead consumers who are less worried about catching the disease to spend their money on services rather than goods.
Lower cases also mean that supply chain delays in key manufacturing hubs around the world can now ease, which will promote faster economic recovery, with the 2% desired by the Fed achieved even faster.
This is not legal, financial, or professional advice. Please consult a legal, financial, or professional advisor for your specific situation.
