General Motors’ chief economist said Thursday that she believes the country’s inflation problems are only temporary and mostly the result of supply-chain bottlenecks — not last year’s stimulus checks — and that they will likely ease up later in the year.
Speaking at a virtual meeting of the Detroit Economic Club, Elaine Buckberg said that year-over-year inflation is “extremely high” right now and “it’s the biggest cloud on the horizon” for the economy.
However, she thinks inflation is poised to let up — so long as employers don’t continually raise wages in response to higher prices and bring on a feedback loop.
She noted how month-to-month inflation numbers aren’t surging, and said the supply of computer chips needed for vehicle production — a major reason for higher prices for new and even used vehicles — is getting better for GM.
“The way I see inflation, I see easing over the course of the year,” said Buckberg, who has been the Detroit automaker’s chief economist since 2018.
“The consensus forecast says inflation will be about 4.6% year-over-year, that means we get under 3% by the end of the year. I still think that’s a reasonable forecast,” she said. “But there is a risk that there’s some feedback between prices and wages that would slow progress, and omicron could slow progress in the near term, but I really do think that we are in a path towards lower inflation.”
Buckberg, who holds a doctorate in economics from the Massachusetts Institute of Technology, was a star guest Thursday afternoon of the economic club’s 2022 Michigan Economic Outlook.
She was joined by Michigan Economic Development Corp. CEO Quentin Messer as well as Detroit News editor and business columnist Daniel Howes, who moderated the virtual event that wasn’t held in person because of COVID-19 concerns.
Howes posed the questions about inflation, holding up print editions of newspapers with headlines about the 7% year-over-year jump in December of the consumer price index, up from 6.8% annually in November and the fastest pace since 1982.
Buckberg said the crucial thing to combat inflation is easing bottlenecks in global supply chains.
Asked her thoughts about how much pandemic relief stimulus contributed to inflation, she said the massive relief packages did help fill gaps in the economy and created higher demand, but aren’t entirely to blame for today’s spiking prices.
“Honestly, I think inflation has, for the most part, been more driven by bottlenecks on the supply side, some of which go all the way back to the time when the economy was shut down,” Buckberg said.
“In terms of employment and returning to work, the generosity of unemployment benefits after vaccines were in effect may have slowed return to work,” she added. “But (unemployment benefits) have not been there since Labor Day … so there seem to be other bottlenecks, like ‘I can’t get child care because there are fewer day care workers,’ or ‘I’m concerned that my child’s school will close and so I’m hesitant to go back and take a full-time job.’ ”
Later in the discussion, Buckberg restated GM’s plans to build two new electric vehicle battery plants by the mid-2020s and said Michigan is in the running for those plant locations.
Howes asked if she was ready to confirm that one of those plants would be going to Delta Township, just west of Lansing.
Buckberg dashed the newspaper editor’s hopes.
“I am not going to break any news for you today, Dan,” she said.