After nosediving from March through May as the pandemic-sired lockdowns devastated U.S. household spending, consumer prices rebounded in the following four months. Some fear this is the start of a resurgence of inflation. The Federal Reserve Bank of New York’s survey of consumer inflation expectations shows a jump from 2.4% to 3% for both one and three years ahead.
If you think serious inflation is coming, you don’t believe in the fundamental power of excess global supply to depress prices. With globalization, Western technology is combined with cheap Asian labor to produce a vast array of goods and, increasingly, services. But Asian consumers purchase only a fraction of what they produce. China’s consumer spending is just 39% of gross domestic product, compared with 68% in the U.S., resulting in a saving glut that is highly deflationary.
