This is especially in sectors where capacity has not survived the lockdown. It will take time for restaurants, entertainment venues and hotels to return to full capacity. The tighter supply amid greater demand is likely to see prices rise sharply in the wake of economic normalisation.
With Covid-19 recovery underway, investors are increasingly worried about the impact of inflation on their portfolios. To combat this, OCBC Investment Research recommends that investors buy into firms with greater ability to boost prices going forward.
To be sure, deflationary forces are still present in the market as employees remain furloughed, keeping a lid of wage deals. Still, the OCBC Research Team sees a post-vaccine world releasing significant amounts of accumulated savings into the economy, resulting in a sharp rise in prices. Supply in some sectors may not keep up with post-Covid demand.
