PART 1 The Economy

R E S E T 2 0 2 2 2 0 2 2 R E S E T

PA R T 1 : T H E E CONOM Y

The spotlight has firmly been on inflation since the start of the year. Initial opinions that the primary cause of inflation being due to supply chain bottlenecks have given way to greater pressures emanating from the devasting Russia-Ukraine war. The resulting resurgence of supply chain stress has further compounded the situation. Consequently, markets around the world are encountering inflationary environments that have not been experienced for a number of years, or in some cases a number of decades. Clearly this rings the bell of caution, but the situation in Asia Pacific does need to be placed into context compared to other regions. The strongest inflationary forces continue to be felt in parts of Europe and in the U.S. In the U.S. inflation reached 8.6% y-o-y in March of this year and as of May had marginally eased to 8.5%, but the INFLATION

pullback is minor compared to the level of price growth already in the system. To put these figures into context, inflation in the U.S. is at its highest level in the last 40 years and is affecting many aspects of society including food, labour, materials and energy. Similarly, inflation in Europe has sky-rocketed, fuelled by the economic impacts of the Russia-Ukraine war. May’s inflation figure for the Eurozone came in at 8.1% underpinned by a 39% y-o-y increase in energy pricing – a level that it has broadly been at since March. The situation is more severe in the UK with inflation running at 9.1% in May, also a 40-year high, and energy pricing up 53% y-o-y. The Bank of England has recently stated it expects this figure to lift further with inflation to hit 10% in the fourth quarter of the year.

FIGURE 1: CPI FOR SELECTED MARKETS (% Y-O-Y)

2% 3% 4% 5% 6% 7% 8% 9% 10%

0% 1%

Sep-21

May-22

2018-19 avge

Source: Moody’s, Cushman & Wakefield * Australia Q1 2022

6 | C U S HMA N & WA K E F I E L D

C U S HMA N & WA K E F I E L D | 7