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Soaring commodity prices are symptomatic of printing press inflation kicking in! The WSJ reports:
The run-up in commodity prices is casting a cloud over the global economic recovery, slamming vulnerable businesses and households and adding to fears that inflation could become more persistent.
The world hasn’t seen such across-the-board commodity-price increases since the beginning of the global financial crisis, and before that, the 1970s. Lumber, iron ore and copper have hit records. Corn, soybeans and wheat have jumped to their highest levels in eight years. Oil recently reached a two-year high.
Economists are expecting consumer-price data due later this week to underscore the trend. They say China’s producer-price index, a gauge of factory-gate prices, could climb to its highest level since August 2008 on Wednesday amid rising commodity prices. The U.S. consumer-price index, released a day later, is expected to show a sharp rise in the 12 months through May, also driven by higher labor costs.
Ordinarily, economists and central bankers try not to worry too much about commodity-price moves. Commodity prices can be volatile, and they make up a smaller part of consumer inflation than other costs, like housing.
But manufacturers’ profit margins are shrinking because of higher costs for raw materials. Households are paying more for gas, groceries and some restaurant bills, curbing their ability to spend elsewhere. In poorer countries, some are going without basic needs entirely.
“We are being hit from every possible angle,” said Franz Hofmeister, chief executive of Quaker Bakery Brands Inc. in Appleton, Wis. He says his costs for items including wheat, energy and new aluminum equipment have shot up at least 25% to 35% this year.
Customers protested when his firm lifted prices for pizza crusts, burger buns and other goods by as much as 8%, but more increases might be needed.
“The scary thing is, we don’t really see an end in sight to these cost pressures,” he said.
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