Inflation showing signs of life on robust economic growth

  • Business
  • Monday, 13 May 2019

"Sluggish sales in semiconductor and automobile-related industries were reported by some panellists, while demand from Europe, China and Japan was also reportedly subdued," said Joe Hayes, an economist at IHS Markit.. (File pic shows a man working at an assembly line of Hyundai Motor's plant in Asan, South Korea.)

HONG KONG: From pork in China to iron ore in Brazil, inflation is flickering in parts of the global economy.

While overall price growth remains largely subdued, the emergence of costlier items will encourage those who say it’s only a matter of time before inflation accelerates due to robust economic growth and tight labour markets.

For now, higher commodity prices rather than surging demand is a key factor. Upcoming earnings from the world’s biggest retailer Walmart Inc and from Target Corp will shed light on how consumers are faring.

Here’s a look at some current hot spots.

Meat prices are starting to climb. McDonald’s Corp is raising its forecast for food costs in the US this year as protein prices start to tick up following the African swine fever in Asia. In the last quarter, restaurant menu prices were up about 2% in the US, McDonald’s said last month.

Brewhouse chain BJ’s Restaurants Inc said it’s expecting higher pork prices, while China’s KFC operator Yum China Holdings Inc said surging poultry costs would weigh down margins for the rest of the year.

Events in China are behind the jump in pork prices. An unprecedented outbreak of African swine fever has hammered the supply of pork. With stocks of pigs back at 2011 levels the government has warned that pork prices may climb 70%. The spillover effects will be noticeable.

Keep an eye on steel prices. Iron ore has rallied after supplies in Brazil and Australia were hit by disruptions, potentially setting the stage for benchmark prices to extend gains toward US$100 a tonne.

Procter & Gamble Co (purveyor of Pampers), and Kimberly-Clark Corp (the maker of Huggies) have raised prices as have Coca-Cola Co and PepsiCo Inc. Europe’s consumer-goods giants Nestle SA and Unilever are also showing new signs of life by selling more food and cleaning supplies at higher prices. In April Danone SA forecast higher milk prices this year. — Bloomberg

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