Current inflationary pressures are an inventory supercycle that will soon pass. Deutsche with the note:
The US payrolls release on Friday showed employment at high-street shops flatlining for the third consecutive month at 20% below pre-COVID. Retail employment has been in decline for the last three years, but in a few months COVID has accelerated change that would have likely taken a decade to materialize. Wehighlightedin earlier research how market focus will increasingly shift to life after the “V” part of the recovery in coming months. Another question is how much pent-up demand will there be as consumers rotate from goods to services. Will consumers really catch-up on all the lost restaurant meals? We presented data from Israel- one of the first countries to open up – a few weeks ago which is showing limited pent-up demand. Today, we highlight UK high-frequency aggregate credit card spending data (broader than the retail sales numbers) which is sending an even more cautionary note. Excluding base effects, spending in the UK is not really surging, it’s just catching up to where it was pre-COVID (chart 1). Last week ShreyasGopalshowedmaterial Brexit drags emerging too, especially on the financial services sector. On another front, Robin Winklerpublishedsome fascinating charts showing a collapse in US consumer sentiment for durable goods purchases. People are worried about rising prices, but as a result they are delaying – not accelerating- consumption. We’ve been big vaccine re-opening optimists for the last nine months but beyond the positive cyclical dynamics, there is huge structural change, too. Life after the V(accines) will be of increasing focus in coming months.