Investors should not be concerned about the possibility of inflation during the post-lockdown recovery period, suggests Dean Turner, UK and Europe economist at UBS GWM CIO.
Outlining his views during the firm’s monthly briefing, Mr Turner reaffirmed that the economic recovery was gaining momentum, defined by a vigorous rebound in activity growth of around six and a half percent for the global economy. He also anticipated five and a half percent growth for the global economy, with momentum continuing into 2022.
However, he also acknowledged that investor attention was focused on inflation. According to most recent reports, UK inflation increased by 0.7 percent in March, driven by the higher cost of petrol and clothes. The Office for National Statistics reported that consumer price index rose by 0.7 percent in the past 12 months.
The economist believed that while a short-term increase was highly likely, it would be at manageable levels mitigated by context. For example, he suggested that the price of oil last April had set a low base comparison for this current period in 2021. In addition, Mr Turner pointed to anticipated shifts in consumer behaviour, which he believed would keep inflation in check.
As a consequence, he conveyed the UBS GWM CIO’s perspective that it would ‘not be a problem’.
He explained: “As the economic recovery takes hold and the shift from goods to services unfolds, there is still a situation where we have a surplus supply of labour. That is going to be one of the factors in our view that prevents inflation from surging, or becoming more problematic.”
Mr Turner was speaking alongside Mark Haefele, global chief investment officer at UBS GWM and Kiran Ganesh, cross-asset strategist at UBS GWM CIO.