The energy shock tightens its grip

The energy shock is rippling across the global economy, straining consumers and putting pressure on middle market businesses, writes RSM US Chief Economist Joe Brusuelas in the April issue of The Real Economy. 

Even with the two-week ceasefire announced on April 7, elevated oil prices are deepening an already significant affordability challenge for households. In addition, surging energy prices are increasing the price of intermediate goods, which in turn raises production costs and dampens consumption. As demand softens, Brusuelas notes, the risk to overall economic growth becomes more pronounced.

Expect top-line inflation to reach 3.5% to 4%, even if the war in the Middle East eases, Brusuelas writes. These pressures will continue to erode purchasing power and constrain discretionary spending.

Also in this issue, Brusuelas writes that the Federal Reserve faces a particular challenge in fulfilling its dual mandate of maintaining price stability and fostering maximum employment.

With cost pressures expected to intensify, how can middle market businesses navigate the impact? RSM’s Peter Ramer offers some guidance for consumer products businesses.

Finally, in our Market Minute series, Brusuelas explains how global investors are pushing long-term interest rates higher as the energy shock fuels inflation, while surging jet fuel costs are likely to curb corporate and household travel.

We look at these topics and more in this issue of The Real Economy.