Three of the key supply-side factors driving today’s global inflation levels have already turned around, meaning relief could be on the horizon for shoppers worldwide.
Price Relief
Three big inputs to global inflation are seen easing from recent peaks
Sources: InSpectrum Tech Inc., Drewry Shipping Consultants, Green Markets
Notes: InSpectrum contract prices reported monthly. Drewry (price per 40-foot container) and Green Market (per short ton) indexes are weekly; last figure for month shown here
- Bellwether semiconductor price — a barometer of costs of finished electronics products as diverse as laptops, dishwashers, LED bulbs, and medical devices delivered worldwide — is now half its July 2018 peak and down 14% from the middle of last year.
- Spot rate for shipping containers — which tells us more about expenses we can expect later in the pipeline for apparel in Chicago, luxury items in Singapore or home furnishings in Europe — has declined 26% since its September 2021 all-time high.
- North America’s fertilizer prices — an indicator of where global food inflation is going, including bills for tomatoes in London or onions for sale in a Johannesburg market — is 24% below its record high in March.
With inflation now exceeding 8% in the euro area, expected to stay above that level in the US when May data comes out on Friday and on the march in Asia too, central bankers around the world are scrambling to contain it.
Hawkish Stance
More than 60 central banks have hiked rates this year
Source: Bloomberg
Note: Mapped data show change in interest rates in basis points for distinct central banks since the start of 2022.
Even as central bankers raise rates, more economists are coalescing around the idea that peak inflation is behind us — though there will be a lag before the lower costs of raw materials filter through to the prices shoppers see. Though few forecasters are predicting a return to pre-pandemic prices in the short run, global retail giants like Walmart Inc. are now struggling to unload bloated inventory to a less enthusiastic shopper. So a moderation in those supply-side pressures could eventually allow central bankers to slow their tightening cycles. “While inflation in some parts of the world are yet to peak, there are at least some signs emerging that we may not be too far off in terms of a turning point at which we start to see the annual inflation rate start to head lower,” said Khoon Goh, Singapore-based head of Asia research at Australia & New Zealand Banking Group. China’s producer prices peaked in late 2021 and are beginning to moderate. Economists are forecasting a 6.5% rise in factory prices in May from a year earlier, down from 8% in April. That’s a promising development for relief in imported-goods inflation worldwide, said Goh. In addition, lower container freight rates and improving supplier delivery times in purchasing managers indexes point to easing bottlenecks that should curb price pressures later this year, he said. NN: We are experiencing 3 types of inflation:
- Supply chain
- Commodities shortages
- Energy supply
The supply chain is now overfilled. China is back. And the smartie pants like Wall Mart hired their own ships and filled up their warehouses. They are sitting on billions in overstock that will be liquidated at steep discounts… Just the opposite of consumer goods Inflation
Commodity shortages in food are 1 season away from being resoled. Sky high price for food goods have seen farmers and producers over plant. Wheat peeked at $13.00 a bushel. Now its at $10.00. Corn touched $10.00 now its now approaching $7.00. Already grain prices are plunging and its not even harvest time which will be a record. As far as minerals and metal shortages alternative suppliers have cranked up operations. Platinum hit $1,200 a ounce now its trading at $1,000. Palladium hit $3000 a ounce now at $2000. You can see this in cooper and steel prices which are plunging. Lumber hit $1,400 now trading at $600.
The last monster on the supply side is energy. Prices are so high that we are starting to see demand destruction and oil looks to me like its topping.
Wage push inflation. With the slaves sitting fat and sassy with happy checks and a 35,000 Dow. It was why worry be happy and thanks to Robin Hood all they had to do was check the follow me off the cliff trade system to se how much they made. Well that fantasy is over as the masses are racking up hugh stock market losses. And the happy check money is running out. The work force is expanding and wage growth has stopped as the masses compete once again with each other for jobs.
The inflation rate still high has peeked. The worst is over. That does not mean the Fed does not have to raise rates. But it does mean that prices will moderate and drop. The perfect ingredients are in place for a BIG bear market rally.
We are now in a bull spread and all i can say is GOD please have mercy on me.