Patrick Boyle On Finance Is Inflation About to Get Much Worse?
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May 3, 2026 U.S. consumer sentiment, oil above $125 a barrel, and a disrupted Strait of Hormuz that removed tens of millions of barrels daily. Structural forces like demographics, onshoring, tariffs and shrinking labour supply are eroding the cheap-goods tailwind. Fiscal deficits, political pressure on central banks, and undercounted housing costs could make sustained higher inflation more likely.
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Two Distinct Inflation Dynamics
- Inflation had two separate dynamics running concurrently: domestic services and tradable goods.
- China-made goods caused three decades of goods deflation, masking steady services inflation driven by local labour markets.
Demographic Sweet Spot Drove Disinflation
- Demographics and global integration produced a once-in-history labour expansion that suppressed wages and prices.
- From 1990s to recently the baby boom, rising female participation and China's entry doubled global labour supply, creating a disinflationary tailwind.
Multiple Reinforcing Inflation Pressures
- Multiple lagging pressures are pushing inflation higher even before the energy shock.
- Tariff pass-throughs, tightening labour markets and fiscal looseness are combining to raise prices and wages.
