While often excluded from core inflation metrics, the soaring cost of owning or renting a home represented a critical form of inflation for the average family, reshaping wealth distribution and economic mobility. Lockdowns suppressed supply while fiscal stimulus and savings fueled demand, creating a perfect storm for prices.
Asian Manufacturing's Role in Inflation Over the Last 30 Years
The Pandemic Shock and Supply Chain Crisis The onset of the COVID-19 pandemic in 2020 delivered a dual shock to the global economy. Driven by low mortgage rates, relaxed lending standards, and speculative investment, the cost of shelter became a primary driver of household financial strain.
This period of deliberate restraint, while necessary, often translated into subdued economic growth and higher unemployment as the cost of cooling demand was paid in jobs. The intricate web of international supply chains, optimized for efficiency over resilience, proved particularly vulnerable, transforming a temporary shortage into a sustained inflationary spiral.
Asian Manufacturing's Role in Inflation Over the Last 30 Years
This persistent undershooting of inflation goals led central banks to experiment with unconventional policies like quantitative easing, laying the groundwork for future imbalances. Consumers adapted to a new reality where significant wage increases were less common, and the memory of double-digit inflation acted as a powerful psychological anchor, temporarily suppressing price expectations.
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