Economists dial up inflation targets amid rising wages, strong consumer demand: NABE

Economists surveyed by the National Association for Business Economics are predicting that annual inflation will remain above 2% over the next three years as a result of rising wages and strong demand for goods and services. 

NABE panelists project that the overall consumer price index will rise 6% year-over-year in the fourth quarter of 2021, compared to September's forecast of 5.1%. CPI inflation is expected to remain elevated by the end of 2022 at 2.8% year-over-year, compared to September's forecast of 2.4%. 

The core PCE price index, which excludes food and energy, is expected to rise 4.1% year-over-year in the fourth quarter, compared to September's 3.8% forecast, and slow to a 2.6% year-over-year rate in the fourth quarter of 2022. About 71% of NABE survey respondents anticipate the core PCE gauge will not decline to or below the Federal Reserve's 2% target until the second half of 2023 or later. 

Approximately 87% of panelists said ongoing supply chain bottlenecks have been the key driver for higher prices, while 76% attributed recent price increases to strong demand and 69% cited rising wages. Fifty-one percent of respondents said elevated demand for housing is an important component fueling inflation, with 60% of respondents anticipating the shelter component of the consumer price index (CPI) will rise at an annual rate of 3% to 5% by the end of 2022.