Bank of Montreal analysts on the autoworkers strike, say the impact will be across multiple facets:
- The most immediate of which will be the associated increase in new car prices with used vehicles quick to follow. The inflationary impulse will be exacerbated by the recency of the impact on supply from the pandemic-inspired chip shortage and other supply chain strains. Dealerships undoubtedly still have copies on hand of ‘car sales and a guide to profiting in a global pandemic’.
- the hit to gross production which, when combined with the potential for a government shutdown (and the associated uncertainty) could materially undermine economic confidence during the balance of 2023.
And, on wages fuelling inflation:
- By layering in the wage component as autoworkers seek improved pay packages, Powell has a new wrinkle in his endeavour to avoid a wage-inflation spiral. The impact of collective bargaining was always a wildcard during this cycle, and it will be interesting to see if union activity overwhelms the otherwise moderating pace of nominal wage growth.
Federal Reserve Chair Powell