Why energy and labour inflation are more important than supply chain issues

Why energy and labour inflation are more important than supply chain issues

Søren Otto Simonsen

Senior Investment Editor

Summary:  Inflation is surging, especially in the Western world. Central bankers have for a while now discussed whether the price increases are here to stay. Our answer is a rock solid ambiguous yes.


If you look up inflation in financial study books, you will see that there are two kinds of inflation – temporary and structural. As the word suggests, the former refers to price increases that are caused by some external global financial event, which also has a known or unknown end-date. The latter is more fundamental and is the inflation on which society is built.

“Generally, it is our belief that the inflation we see is stickier than some central banks – especially the Fed – believe. With that, I mean that we cannot only attribute it to temporary impulses and thus, we should expect it to be higher for longer, which can cause all sorts of turmoil on the financial markets,” says Peter Garnry, Head of Equity Strategy.

To learn more about inflation, take a look at the SaxoSession, with our Chief Investment Officer, Steen Jakobsen, where he takes you through the ins and out of the very important concept.

Humans and energy keep prices high

When speaking about stickiness of inflation, it is necessary  to consider which drivers of higher prices have the sturdiness to hang around. A primary component of the current increase is the global labour shortage.

“We are seeing inflation on the higher side of what we have had historically and one reason for that is labour shortages, which cause a more permanent high level of inflation, as they are pushing up wages in the USA, UK and in Europe to a degree we haven't seen for many decades, especially for lower income jobs like trucking and services,” Garnry says.

He adds that the rent and housing markets are also key in terms of pushing inflation higher, structurally: “We are also monitoring rent prices very closely, because as a whole other part of the pandemic story, we’ve seen them galloping because of very low interest rates.”

Another area of the financial industry, which can add to structural inflation, is the commodities market: “I think another area where we're also seeing price increase is in the most basic input of all - commodities. In 2021, we saw higher prices across all sectors. Energy, metals, agriculture. Agriculture is the worrying part because its prices were more than 30% above the annual average, and we’ve got weather phenomena making it realistic that we could see these high agricultural prices continue into 2022. 

The whole energy sector in Europe and Asia, is being hit by surging gas prices. Simultaneously, oil prices are at the highest they've been for a number of years. Normally the cure for high prices is high prices because it incentivizes production and lowers demand, but the green transformation paves the way for increasing energy prices continuing. That means that the demand side is lacking in that balancing activity,” says Ole Hansen, Head of Commodity Strategy.

According to Hansen, we shouldn’t expect prices to fall any time soon: “It basically means we could see energy prices elevated for the foreseeable future and since oil and gas are such integral parts in almost everything, it will be part of the structural price increases in society - just take a look at fertilizer. Who would have thought we could run out of fertilizer?” says Ole Hansen, Head of Commodity Strategy.

The inflationary container will be emptied at some point

So while there’s an argument to be made that inflation is here to stay, we may see some pressure being relieved in due time, as Garnry argues that increased prices of shipping should come down, if history provides any guidance: “The supply effects on inflation from increasing container freight prices are temporary - we will see container prices come down. The container and logistics industries have historically been industries with boom bust cycles, so when you have these high prices, more capacity is being built, ships are put in the sea, so I think those effects will move away. We will get there, it will just take some time,” he says.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...

Content disclaimer

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Please refer to our full disclaimer and notification on non-independent investment research for more details.
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-ch/legal/disclaimer/saxo-disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.