The Instagram effect is steadily bringing prices up as consumers are once again enjoying public activities, and food and experts say it helps inflation rates.
Economies Are Starting to Open Again
As the world is starting to get back on its feet after almost a year of lockdown, consumers are starting to spend more on public activities once again.
Paul Donovan, chief economist at UBS Wealth Management, said that peoplee are now showing off after being stuck in lockdown.
Donovan calls this the "Instagram effect," as per Business Insider, and people are once again splurging on things they can post that's worthy of the 'gram. Donovan said that the shift in people's spending patterns can help bring the economy some sort of stability as sectors like lumber can recover.
He expected that the change is a good thing for markets and also investors. He said that in the coming months, people will only spend on items or things that they can post on Instagram. The range can be from toys, clothes, food, and going out in general.
Food and Clothing Gone Up
In the US alone, the inflation rate has increased and hit a 13-year high, largely contributed by a sharp rebound towards energy prices.
Official stats show that there is a notable increase towards food, clothing, and travel as people are now going out of their homes, once again.
Markets were worried about inflation in 2021, however, Donovan has another opinion saying that the Instagram effect is a good thing for the economy as compared to what the Federal Reserve has had to say about the matter.
Service businesses, such as restaurants, are better equipped than traditional goods providers. This would help the bottleneck supply of products like microchips and lumber far less likely to happen.
Potential Risks Still Worrying Experts
Hugh Gimber, a global market strategist for JPMorgan Asset Management, also agreed that spending on luxury goods and food can boost shares of companies within the sector. However, Gimber is equally worried and warned that inflation could still be a longer problem.
Rising wages could occur as sectors reopen and acquire labor could potentially create pressure across all economies.
Donovan also warned of the risks towards the Instagram effect saying that "if we don't start to see the deceleration of inflation in the States that I expect to see, that would worry markets about the timing of rate moves."
Investors, as of now, are much less worried about inflation given the steady rise of some sectors that are starting to see a good increase in numbers.
Stocks are rebounding at an increasingly good rate and Facebook is enjoying a seven percent increase in traffic for last month given the more people using it again to post about their food and travel outings.
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Written by Alec G.
