ONE ON ONE: USC economist explains recent inflation, predicts future trends

COLUMBIA, SC (WOLO) — The current rate of inflation of 9.1 percent is the highest in American history in more than 40 years.

While not as bad as the post WWII inflation rate of nearly 20 percent, it still is impacting many people’s budgets, including here in the Midlands.

You may be paying more than normal at the pump, but according to one USC economist, most Americans have more than normal in their bank accounts.

“So consumers are still in pretty good shape. That excess cash allows them to spend more which bids up prices and demand overall,” said Joey Von Nessen, University of South Carolina research economist. “On the supply side, we’re continuing to see constraints across the economy. The biggest one that affects most markets is the shortage of truck drivers.”

Even with high demand and low supply, he says that inflation will begin to slowly cool off in the next couple of months.

“Consumers can expect that during the second half of the year, but it does take time,” the economist said. “This is something that South Carolinians have to be prepared to deal with for a while, this high rate of inflation.”

The Federal Reserve has raised interest rates in an effort to combat high inflation. Von Nessen believes that we will also see less new spending from the federal government. 

“We already have a significant level of demand and we don’t need to fuel that at this point with additional spending,” he said. “So on a fiscal and a monetary side, we see ways that this inflation challenge can continue to be addressed as we move into the second half of the year.”

However, he adds that a recession in the near future is predicted by many economists. 

“There’s about a 50 percent chance of recession sometime in the next 18 months, so either the latter half of this year or sometime in 2023,” Von Nessen said. “If we do see a recession, that doesn’t necessarily mean an economic catastrophe.”

Even so, he advises consumers to be smart with their money.

“I think the main thing that consumers need to be aware of is that this is a challenge that will take time to resolve,” Von Nessen said. “They need to expect that while inflation will start to come back down, it will still remain elevated for the second half of this year.”

The economist says people can save money by carpooling or using coupons at the grocery store.