Q2 Growth May Be Faster Than Expected

The current surge in inflation is predicted to be transitory, with moderately higher inflation by 2023 than was seen during the past decade forecasts a new study out of the UCLA Anderson School of Management. “Although the data do not seem to support a sustained surge in inflation, it’s a risk worth monitoring, noted UCLA Anderson Senior Economist Leo Feler

The report also predicts a relatively rapid return of homebuilding through the coming two years due to the continued demand for a limited housing stock coupled with low interest rates. The study looks for home price appreciation to continue this year at 11.9%, with the increase in home prices abating to 7.5% in 2022 and 4.6% in 2023.

In an overall outlook for the economy nationally and in California, the study said robust growth still remains on track for 2021 as was predicted by the academicians in March but cautioned economic recoveries are never smooth. Moderately high inflation can be expected in the short term, said the experts with housing and services driving the recovery and employment levels recovering to previous peaks over the coming year.

The study also said that growth in the current second quarter should be faster than had been anticipated.

“The faster growth in services consumption reflects a release of pent-up demand for leisure and hospitality, recreation and deferred health care, and a return to prior trends in education and social services,” said Feler who pointed out that slower growth in goods consumption indicates satiation after a year of above-average goods purchases and a shift in household spending to experiences.

In another look view on inflation, JLL Chief Economist Ryan Severino is cautioning it will remain sustainably above levels that many have gotten used to over the last 12 to 13 years.

However, First American Title Insurance Co. Chief Economist Mark Fleming said there are good arguments for this inflationary pressure being temporary as supply chains will catch up.