Technology-led disinflation will not shelter us from a storm of fast rising prices amid economic slowdowns
The new reality with which economies must reckon is higher inflation and slowing economic growth. And a big reason for the current bout of stagflation is a series of supply shocks that have curtailed output and raised costs. The covid pandemic forced many sectors to lock down, disrupted global supplies and produced a persistent reduction in labour supply, especially in the US. Then came Russia’s invasion of Ukraine, which has driven up various prices. China’s draconian lockdown in major economic hubs has squeezed supplies further. But even without these short-term factors, the medium-term outlook would be darkening. There are many reasons to worry about stagflationary conditions haunting the global economy with higher prices, lower growth, and possible recessions in many places.