I have been reporting since last summer about the rise in commodity and crude oil prices and their potential impact on world inflation. Some countries are already suffering from the effects of this with Chinese consumer inflation for example having risen to 5.1% and retail price inflation in the UK is at 4.7%. I reported back on the 5th of January that overall Euro zone inflation had risen above target to 2.2% with Greece the outlier with her consumer price inflation now running at 5.2% although in her case the rise is partly attributable to a rise in consumer taxes such as Value Added Tax.So the impact of the commodity price rises has begun to feed into measures of inflation.
What is currently causing this?
I wrote yesterday about the recent rises in commodity prices as measured by the Commodity Research Bureau spot index which rose again on the day by 1.39 to 537.91. The main contributors to the rise were the livestock and foodstuff components both of which rose by more than 1%. Indeed with their being riots in one or two parts of the world at this time over food prices I took a closer look at the foodstuffs component of the index. The rally started on November 29th of last year when the index closed at 400 whereas last night it closed at 468.66 for a rise of 17% in just over a month.Heady stuff indeed. There were problems with food prices back in 2008 but the foodstuffs index used hit only hit a peak of 449 back then which we now have comfortably passed.
The foodstuffs index has the following constituents: Butter, Cocoa, Corn, Hogs, Lard, Soybean Oil, Steers, Sugar and two measures of wheat prices. Read more...
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