Market flash: Inflation surprise
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Inflation: early signs
Inflation is now, one of the main sources of concern within the financial market industry. There is indeed a lot of uncertainties regarding the transitory nature of these inflationary pressures.
For several months now, signs of inflation have increased in our economies. One of the most distinct signs of pressure emerged from the commodities market, currently displaying significant price increases within raw materials. Since the end of 2019 (i.e. before the start of the crisis associated with the pandemic), iron ore has increased by 69%, copper by 61%, and nickel by 21%, and these increases are not limited to industrial metals but also affect agricultural raw materials with wheat and corn increasing by 17% and 60% respectively.
Commodities evolution since 2019
Source: Bloomberg. Evolution of future contract prices (in $)
The Real Estate market is in a way very similar, it has pushed wood prices to extreme levels (+229% since the end of 2019…) and central banks to consider measures to limit loan access in countries such as New Zealand and Canada. The strong demand for goods (offsetting the closure of a large part of services) also caused a break in the semiconductor supply chains, leading once more to inflationary tension on several categories of goods (Electronics, second-hand cars, etc.)
So far, energy has been the only commodity that has not shown a huge increase over the period (+3.73%), this is mainly due to a sharp decline in commercial flight demand since March 2020.