Global Macro Research
Commodities

Is global disinflation under threat from commodity shocks?

Global headline inflation pressures have eased as base effects dragged the contribution of food and fuel to inflation lower. However, a resurgence in energy prices and the increasing risk of El Niño weather patterns caution against thinking inflation risks have decidedly ebbed. While these trends are unlikely to derail the improvement in inflation, they could slow the pace of disinflation.

Authors
Senior Research Economist
Emerging Markets Economist
Lizzy Galbraith, Political Economist, abrdn
Political Economist
inflation

Duration: 1 Min

Date: Aug 25, 2023

Key Takeaways 

  • Global headline inflation has eased year to date, but a resurgence in energy prices and the threat to food prices from El Niño weather patterns threatens this disinflationary trend.
  • Tighter energy supply, a recovery in Asian travel demand, and the resilience of the US economy could keep oil prices higher and lead to spikes in LNG prices.
  • Meanwhile, agricultural prices face three threats: political risks in Europe, El Niño weather patterns, and disruptions to supply driven by policy responses to the first two.
  • Although workarounds have been found to reduce the impact of the Russia-Ukraine war on food supply, El Niño-related disruptions could lead to sudden bouts of food price inflation.
  • While these commodity price risks are unlikely to reverse the course of global disinflation, they could delay easing cycles, particularly in emerging markets more vulnerable to such shocks. 

     

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