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Overview: As we have detailed for nearly two years, inflation across the globe was on the rise despite the central banks denying the reality so they could continue to pump in cheap money to artificially pump up equites and economies.
And as we have also greatly detailed in previous Trends Journals, as a result of the sanctions imposed upon Russia by the United States and NATO, inflation has, and will move much higher.
INFLATION REACHES 7 PERCENT IN U.K.
Inflation in the U.K. in March reached 7 percent, its highest since 1992, according to the Office of National Statistics, and surpassing the 6.7 percent forecast by economists polled by The Wall Street Journal.
The rise from February’s 6.2 percent was largely due to a 44-percent increase in the cost of liquid fuels, according to the WSJ.
Inflation will gallop even faster this month, analysts predict, because the cap on fuel costs rose by an average of 54 percent on 1 April.
In the U.K., the government sets a limit, or cap, on the amount utility companies can charge customers for each unit of electricity and natural gas.
This month, the cap on gas prices jumped from £4.07 to £7.37 per kilowatt-hour.
CANADA’S CONSUMER PRICES SOAR TO 30-YEAR HIGH
The annual rise in Canada’s consumer price index gained a full point in March from February, climbing to 6.7 percent year on year, surpassing the 6.1 percent estimated by economists in a Bloomberg survey and reaching its highest rate since January 1991.
Prices jumped 1.4 percent from February to March this year alone.
The core measure of inflation, excluding more volatile components, was up 3.77 percent, the largest rise since October 1991.
Gasoline prices contributed the most to inflation, but price hikes were embedded across the economy, in cars, food, housing, and other areas.
The cost of goods was up 9.2 percent, the most since 1982. Prices for services were up 4.3 percent, a pace unseen since 2003.
Inflation’s rate surprised the country’s central bank, the Financial Times reported. The Bank of Canada (BoC) had increased its key interest rate by a half-point last week.
The new figure pressures the BoC to stop its stimulus programs early, the FT said, and investors are expecting the bank to levy another half-point rate hike at its 1 June meeting.
“Today’s surprise on inflation substantially increases the odds that we do see another 50-basis-point hike in June,” Royal Bank of Canada economist Josh Nye told Business Times magazine.
“The market was starting to lean in that direction and this will only add to that,” he said.
The news pushed the yield on the government’s two-year bond to 2.56 percent, the highest since October 2008, with the ten-year bond returning more than 2.8 percent.
Inflation is likely to remain high for some time, which could cause consumers to hoard staple items and spend now instead of saving for the future, the BT noted.
CORN PRICES HIGH AS AN ELEPHANT’S EYE
July corn futures traded at $8.04 per bushel on 25 April, their highest since September 2012 and up about a third since this year began, CNBC reported.
Together, Ukraine and Russia ship about 20 percent of the world’s corn exports. The war in Ukraine has disrupted ports and transport infrastructure and Western sanctions have made the price jump even more dramatic.
Ukraine’s abundant wheat crops have earned it a reputation as “the breadbasket of Europe” but it also supplies much of the wheat consumed in northern Africa and the Mideast.
Russia also normally ships wheat as well as chemical components of fertilizer, but sanctions have curtailed those exports.
With an estimated 20 percent or more of the world’s wheat off the market and fertilizer in short supply, traders are pricing corn as the substitute grain that much of the world will turn to when wheat is no longer available.
Even before Russia invaded Ukraine, world food prices were being squeezed by droughts in the Americas, disrupted supply lines, and inflation.
The United Nations and World Bank have warned of widespread food insecurity as this year progresses, particularly in Africa and the Mideast.
TRENDPOST: As we have noted, the implications of the Ukraine War and the sanctions imposed on Russia are a result of a wide range of rising prices adding to inflation.
FOOD, ENERGY COSTS DRIVE U.S. INFLATION TO 41-YEAR HIGH
The U.S. Consumer Price Index (CPI) shot up 8.5 percent during the 12 months ending 31 March, the fastest pace since December 1981, the U.S. Bureau of Labor Statistics reported.
The 12-month rate in February was 7.9 percent.
The March CPI was up 1.2 percent from February this year.
Both gains matched the median forecast among economists Bloomberg had polled.
Much of inflation’s gain from February through March is attributable to the Ukraine war, which cut off shipments of food, fuel, and other necessities from the combat zone and drew sanctions from Western allies, banning imports from Russia and, more recently, its ally Belarus.
The loss of Russian oil, which tanker companies largely refuse to load and ship in a war zone, has driven global oil prices higher, sending U.S. gas prices to set records last month before easing back slightly on president Joe Biden’s order to release 180 million barrels of oil from the U.S. Strategic Oil Reserve.
The CPI’s energy subindex soared 32 percent in March, year on year, with gasoline prices up 48 percent over the period.
Fuel oil’s price rocketed up 22.3 percent during March alone; gasoline prices grew by 18.3 percent.
Food prices rose 10 percent last month, year on year.
The core CPI, which ignores the always-volatile prices of energy and food, grew by 6.5 percent through the year and 0.3 percent from February through March, both slightly below forecasts.
Fuel oil counted for the largest one-month price increase, with prices ratcheting up 22.3% between February and March alone. Gasoline followed with a 18.3% gain. Transportation services notched a 2-percent uptick, likely powered by the rise in energy prices.
TREND FORECAST: Many economists have predicted March or April will see inflation’s peak. The core CPI added 0.3 percent in March, less than the 0.5 percent economists expected, lending some credence to the forecast.
But most of those predictions were made before China slammed shut several cities to halt another round of COVID infections.
The shutdowns affect key manufacturing hubs and the world’s busiest port in Shanghai, which will clog other ports, kink supply chains, and extend the shortage of consumer and industrial goods.
Also, and they are not taking into account the U.S. and NATO ramping up its war against Russia which will keep prices of various commodities rising as a result of continuing and expanding sanctions
That turmoil, coupled with the U.S. Federal Reserve’s interest rate increase next month—increasingly likely to be a half-point instead of the usual quarter—virtually guarantees that inflation’s rate of increase will not moderate in any meaningful way at least until well into summer.
U.S. PRODUCER PRICES UP 1.4 PERCENT IN MARCH
U.S. producer prices—the prices manufacturers and other suppliers receive for their products and services—added 1.4 percent in March after rising 0.9 percent in February, according to the U.S. commerce department’s producer price index.
Year over year, the index gained 11.2 percent in March, following a 10.3-percent jump the month before.
March marked the fourth consecutive month of double-digit gains.