Pay attention to at least 5 signals from markets and the global economy: inflation may rise again, here’s why.
Inflation could rise again, albeit briefly, due to headwinds that are blowing on the global economy.
As highlighted by an analysis on Bloomberg, there are several signals from the markets and macroeconomic data that call for caution on the downward trajectory of consumer prices. While it is undeniable that inflation has cooled from last year’s record highs, enough to convince central banks to cut rates, the risks of shocks - even temporary ones - capable of soaring prices are equally real.
From the Iran-Israel war to the port strike in the US to the data on the labor market in the world’s leading power, there are at least 5 warnings on inflation coming from the markets.
1. War and oil
Oil prices gained almost 3% after Iran launched ballistic missiles against Israel.
Tel Aviv vows retaliation, threatening to target Iran’s oil infrastructure itself.
“After initial concerns about geopolitical risks in the Middle East, we have seen a return to calm in global markets, but of course, market participants continue to keep an eye on any potential Israeli response,” said Yeap Jun Rong, a market strategist at IG.
Oil prices could easily rise, fueling the prices of consumer goods and services.
“I doubt Israel will target Iran’s oil infrastructure, as such a move would likely push oil prices towards $80, which would not be welcomed by Israel’s allies, who are making great strides against inflation,” said IG market analyst Tony Sycamore.
2. U.S. Port Strikes
The US port strikes are expected to be temporary, evoking memories of when the Federal Reserve thought inflation would be transitory.
A prolonged strike, however, can surge shipping costs. Loaded container ships that can’t be emptied clog up idle U.S. ports. That reduces available capacity in the container shipping system and can lead to higher freight rates.
The goods are then delivered via alternate, longer, and more expensive routes, according to Bloomberg Intelligence. Surcharges are already expected if the strike lasts a few weeks.
3. Hurricane Helene
The devastation caused by Hurricane Helene could cause semiconductor shortages after two mines that produce goods needed for chips were shut down by the storm.
With manufactured goods, especially in the electronics and automotive sectors, relying on semiconductors to function, shortages could put pressure on prices.
4. Industrial Prices
Six of the 10 Federal Reserve reports showed warning signs of inflation and companies’ pricing power.
For example, factories in Philadelphia showed prices paid increased by the most since December 2022, with nearly 100% of companies showing no inflation relief, meaning they are paying the same or higher prices this month, with no significant improvement six months from now.
5. U.S. Jobs
This week’s JOLTs report showed more job vacancies and slower churn rates. Meanwhile, ADP reported that the annual earnings of job changers outpaced those of stayers by nearly two percentage points.
With labor still in demand, there could then be a significant shift between jobs, leaving some positions vacant. This can be a source of wage inflation.
Original article published on Money.it Italy 2024-10-03 08:54:23. Original title: L’inflazione sta per salire? 5 segnali dal mondo
