Financial Associated Press, Shanghai, June 7 (Editor Huang Junzhi) Three key supply-side factors driving the current level of global inflation have turned around, meaning consumers around the world may be about to breathe a sigh of relief.
A global barometer of the cost of finished electronic products such as laptops, dishwashers, LED light bulbs and medical equipment, the price of major chips is now only half of its July 2018 peak and down 14% from the middle of last year.
Spot prices for shipping containers — which can tell us more about clothing in Chicago, luxury goods in Singapore or homewares in Europe — have fallen 26% from their all-time highs in September 2021.
Fertilizer prices in North America are also down 24% from an all-time high in March.Fertilizer prices are an indicator of global food inflation trends, including prices for London tomatoes and onions sold in Johannesburg markets.
Although the global central bank is still raising interest rates to control persistently high inflation, more and more economists agree that inflation has peaked, but it will take some time for the decline in raw material costs to be transmitted to the prices seen by consumers.This week, the U.S. Bureau of Labor Statistics will release the Consumer Price Index (CPI) for May.
David Kelly, chief global strategist at JPMorgan Funds, said in a note, “There are signs that some of the less durable parts of inflation are easing as gasoline prices, used car prices and global food commodity prices all fell in April. Relief. Year-on-year inflation is likely to fall further in the coming months.”
Goldman Sachs global investment team previously said, "US inflation may have peaked, and European inflation is expected to peak in the next 2-3 months. Even in the UK, where inflation has soared recently, we believe that core inflation has peaked in April. , while UK headline inflation is also set to peak after the energy price ceiling was raised in October.”
Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore, said: "While inflation has yet to peak in some parts of the world, there are at least some signs that we are nowhere near seeing annual inflation start to fall. The turning point may not be far away.”
In addition, he said, lower container rates and improvements in supplier delivery times in the purchasing managers' index suggest that bottlenecks have eased, which should dampen price pressures later in the year.
Inflation has fallen relatively slowly
Still, few forecasters are predicting a return to pre-pandemic levels anytime soon, but global retail giants like Walmart are now working to offload bloated inventory to less enthusiastic shoppers.So easing these supply-side pressures could ultimately allow central bankers to slow down the tightening cycle.
UBS analyst Linda Mazziotta said that while inflation is expected to subside, it is likely to remain above pre-pandemic levels, so investors should brace for inflation.
“One way to protect a portfolio from high inflation is to invest in value stocks, or stocks that stand out for their low valuations. Historically, value stocks have outperformed when inflation is above 3% Growth stocks, and policy rates tend to rise in this environment," she added.
Robert Ryan, chief strategist for commodities and energy at BCA Research, said that we are now in an era of scarcity of industrial and agricultural commodities, exacerbated by the Russian-Ukrainian conflict, and this will be a "prelude" for some time to come.
"We haven't built a commodity market that can supply enough to impact the energy transition, and we haven't had an investment that would incentivize us to produce more of our existing resources." He added, "Commodity supply, especially industrial commodity supply, can't keep up with demand. So lower inflation requires demand-side disruption. Even if demand does drop, the final commodity price will be much higher than it was before the pandemic.”
(Editor in charge: CF011)
