Stagflation, not just simple inflation

I think that the criteria placed and expected by the ESG ‘movement’ will accelerate the current rise in inflation.

In fact, I believe that ‘ESG’ requirements pose a risk towards economies experiencing a period of stagflation.

The supply chain disruptions coupled with a return to normal demand (if not slightly higher due to increased savings pools) and rising food prices are part of the normal inflationary effects.

But when you combine ESG pressures and expectations along with legislation, we are beginning to see a decrease in industrial capacity.

Collectively, this will occur through a combination of facilities closing, a dearth in capital expenditure and difficulty gaining new approvals for replacement construction.

Stagflation occurs when we see inflation coupled with stagnating or falling GDP and usually declining productivity.

It’s a most fascinating topic occupying my time how I position investment portfolios.

June 1, 2021

by Rob Zdravevski

rob@karriasset.com.au