🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

From Pork to Pampers: Where Inflation Is Showing Signs of Life

Published 05/12/2019, 12:00 AM
Updated 05/12/2019, 01:01 AM
© Reuters.  From Pork to Pampers: Where Inflation Is Showing Signs of Life
KMB
-
KO
-
MCD
-
NESN
-
DANO
-
ULVR
-
WMT
-
TGT
-
PEP
-
TIOc1
-

(Bloomberg) -- From pork in China to iron ore in Brazil, inflation is flickering in parts of the global economy.

While overall price growth remains largely subdued, the emergence of costlier items will encourage those who say it’s only a matter of time before inflation accelerates due to robust economic growth and tight labor markets.

For now, higher commodity prices rather than surging demand is a key factor. Upcoming earnings from the world’s biggest retailer Walmart (NYSE:WMT) Inc. and from Target Corp. (NYSE:TGT) will shed light on how consumers are faring.

Here’s a look at some current hot spots.

Supersized Inflation?

Meat prices are starting to climb. McDonald’s (NYSE:MCD) Corp. is raising its forecast for food costs in the U.S. this year as protein prices start to tick up following the African swine fever in Asia. In the last quarter, restaurant menu prices were up about 2% in the U.S., McDonald’s said last month. Brewhouse chain BJ’s Restaurants Inc. said it’s expecting higher pork prices, while China’s KFC operator Yum China Holdings Inc. said surging poultry costs will weigh down margins for the rest of the year.

Pork Shock

Events in China are behind the jump in pork prices. An unprecedented outbreak of African swine fever has hammered the supply of pork. With stocks of pigs back at 2011 levels the government has warned that pork prices may climb 70%. The spillover effects will be noticeable.

Iron Ore

Keep an eye on steel prices. Iron ore has rallied after supplies in Brazil and Australia were hit by disruptions, potentially setting the stage for benchmark prices to extend gains toward $100 a ton.

Consumer Staples

Procter & Gamble Co. (purveyor of Pampers), and Kimberly-Clark Corp (NYSE:KMB). (the maker of Huggies) have raised prices as have Coca-Cola (NYSE:KO) Co. and PepsiCo (NASDAQ:PEP) Inc. Europe’s consumer-goods giants Nestle SA (SIX:NESN) and Unilever (LON:ULVR) are also showing new signs of life by selling more food and cleaning supplies at higher prices. In April Danone SA (PA:DANO) forecast higher milk prices this year.

Oil

Oil prices have slid since hitting a yearly high in April, but they are still up around a third this year and a volatile geopolitical backdrop means the outlook remains uncertain. Speculation that Saudi Arabia and other producers will pump more to make up for lost Iranian barrels has helped curb the price gains. Still, economists say the cost of crude remains an issue to watch, especially for nations that rely on imported oil.

U.S. Jobs Market

U.S. employment costs enjoyed the strongest gains for the start of any year in the past decade. That’s the third consecutive year in which the annual pace of growth in the first quarter accelerated from the previous year, a clear sign labor costs are increasing, according to Bloomberg Economics.

Here’s their chart on the Employment Cost Index:

Emerging Pressures

A suite of emerging economies are all experiencing high inflation. Turkey’s consumer prices rose 19.5% in April from a year earlier, while economists project inflation will average 40% in Argentina in 2019. Iran’s inflation could average 50% this year, the highest since 1980, a senior International Monetary Fund official told Bloomberg News. Topping the list is strife-torn Venezuela, where prices are tipped to rise 8 million percent this year.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.