Whatâs Going On Here?Data out late last week showed that a key measure of food prices rose for the ninth month in a row in February â to its highest in six years. What Does This Mean?The last time the United Nationsâ gauge of global food prices rose for this long was back in 2008, and it was followed by a major food crisis. This time around, though, the most affected countries will probably be emerging and frontier markets: those that are more reliant on ingredients like rice, whose price rose 76% last year. Thatâs definitely not good news for Nigeria, whose average household already spends half its income on food. The irony is that this jump in food prices is partly down to another emerging market: Chinaâs been buying up huge amounts of crops from around the world as local weather threatens its harvests. Why Should I Care?For you personally: Itâs trickle-down economics at work.
Developed markets like the US and Europe should be relatively insulated from rising food prices, but theyâre not immune: food producers will likely try to pass their higher costs onto food retailers, which will, in turn, probably pass them onto you. Thatâs not ideal: economists are hoping youâll put any money youâve saved during the pandemic toward economy-boosting nice-to-haves, but you wonât have as much to spend if youâre paying more for the essentials. Itâs not the thought of your pursestrings thatâs keeping the experts up at night, mind you: if you donât spend, the global economy could well fall short of growth forecasts.
For markets: Inflation, inflation everywhere.
Food prices arenât the only reason investors are getting worried about rising inflation: the oil price just hit its highest level since April 2019. Too-high inflation would encourage central banks to effectively increase interest rates, which is why some investors have been selling off bonds and the priciest stocks in preparation. | 