Category: Inflation updates

Currently, the prices of many commodities are in a downward trend. This is due to inflation, the price of oil, the price of gold and copper. Hopefully, it will improve in the next quarter. In the meantime, it is important to keep track of these prices so that you can make the right investment choices.

Copper

Traders are now more active in restocking their short positions in the copper market. As a result, physical copper stocks are down to 61,300 tonnes. Traders also brought metals from LME warehouses to China during the arbitrage window that opened in August.

The price for copper reached all-time highs of $10,512 per metric ton in May. But the price has since been declining. The IMF projects the price to fall to $7,600 per metric ton by 2026. The Department of Industry, Science, Energy, and Resources predicts it to decline to $7,724 in two years.

The price for copper was down 18% from the same period last year. It is expected to decline further to $7,500 per metric ton by 2021 and $8,400 per metric ton by 2023. It is also expected to rise to $8,250 per metric ton by 2035.

Gold

During Q4 2022, gold news could be favorable, according to analysts. The United States is expected to recover from a recession, and emerging markets are also likely to grow, leading to increased demand for gold. But the price of the metal could fall during the fourth quarter. Depending on interest rates in the US, the dollar could also depreciate.

Goldman Sachs analysts predict that the price of the metal will average US$ 1,200 per ounce in the next few years. They cite stronger growth in emerging markets, but also a slowing global economy. They assume that consumers will buy more gold and that household wealth will also increase.

ABN Amro’s gold price forecast for next year is US$ 1,400. It expects the price to drop further, however, by the end of 2018. The bank says it expects the price to be below the current level.

Lean hogs

Despite a slow start, Lean hogs in Q4 2022 have shown signs of life. Futures markets have been projecting favorable pricing opportunities for producers and consumers, albeit at the cost of volatility.

The market is backwardally curved in this month’s forward curve, meaning that it is predicting higher production in the near future, but lower near-term demand. This indicates that supply is expected to continue to outpace demand in the coming months, and the market believes that it will begin to catch up with demand in the next few years.

The USDA WASDE report espouses higher expectations for pork exports. It also indicates that carcass weights will decline in the next three quarters, which is a sign of tightening supplies.

The pork industry has seen a robust domestic demand, supported by strong grocery sales. Consumers are looking for value-conscious options and are trading down from branded products to private label alternatives.

Oil prices

Despite the strong dollar, energy prices have risen this year. It is still unclear where this bull run will end. The short-term bearish market dynamics are expected to keep oil prices below $110/b before year-end.

The Fed has begun a cycle of tightening monetary policies to combat inflation. This could lead to slower manufacturing activity, lower trade, and lower commodity prices. This could also limit oil demand growth. A recession could result from a slowdown in the global economy.

Oil prices are down from their early March highs, but they are still up from the lows of the previous quarter. This is the result of increased supply and weaker demand expectations. The EIA forecasts that global oil inventories will fall slightly in 2023. Despite the expected decline, the EIA also expects record U.S. crude oil production of 12.4 million bpd in 2023.

Inflation

Across advanced economies, inflation exceeded World Economic Out- look forecasts in the 2021-22 period. The increase was led by energy, and a strong recovery in demand drove underlying inflation. However, the corresponding upward revisions in inflation forecasts for emerging and developing Asia and Sub-Saharan Africa were smaller.

Core inflation forecast errors have been less pronounced in China and developing Asia, although the latter has been hampered by cooling economic activity. The global economy may have been at the steeper end of the aggregate supply curve in 2021. However, this may be less pronounced in the coming years as efforts to ramp up crude oil production help soften energy-induced inflationary pressures.

Forecasts for global headline consumer price index inflation have been revised upward by 0.5 percentage points since July. Headline inflation is estimated to rise from 4.7 percent in 2021 to 8.8 percent in 2022.

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The latest inflation market news in the United States is a mixed bag. It includes August’s Consumer prices, the Fed’s interest rate decision, and OPEC’s deal to cut oil output. The report also covers expectations for future inflation. Despite this mixed bag, traders see a one in three chance that the Fed will hike interest rates by a full percentage point next week.

Consumer prices for August

The Consumer Price Index (CPI) showed that prices for core goods and services increased 0.1% in August after essentially staying flat in July. The slowdown was largely due to a drop in gasoline prices, which fell 10.6% last month. Gasoline costs reached nearly $5 per gallon in June, but fell to $3.83 by August’s end. Despite the drop in gasoline prices, core inflation was still 0.4% higher than expected.

Housing and rent increased by 0.7% last month. These increases are a cause for concern for the Federal Reserve, which is increasing interest rates to control inflation and cool the economy. The Fed’s next rate increase is widely expected to be three-quarter percentage points, or 75 basis points, but the Fed may have to raise rates more aggressively if inflation continues to outpace the economy.

The consumer price index for August in the United States shows that prices are continuing to rise despite a tight labor market. However, the growth was moderate compared to July, with food costs increasing by 0.7%. Overall, the core CPI is up 6.3% over the last 12 months, compared to 5.9% in July.

Fed’s interest rate decision

The latest news about inflation in the United States isn’t good. Consumer prices are still rising, but at a slower pace than in the past. The Federal Reserve has said it will raise interest rates again on September 21. But the upcoming data may change the Fed’s calculus. This week, we will see August consumer and producer price indexes and retail sales figures. If these numbers continue to rise, we can expect to see more hikes by the Federal Reserve.

While the headline rate of inflation has slowed, it remains at levels unheard of in the past four decades. These figures are adding to the headwinds facing the Biden administration. The Fed is also grappling with the prospect of raising interest rates again, which could hurt the economy. When news of the upcoming interest rate hike broke, investors sold off gold and stocks.

Earlier this week, the Labor Department reported that core inflation in August was 7.4%, well above the Federal Reserve’s target of 2%. Those figures sparked expectations of a third straight hike later this month. However, the Fed is also keeping an eye on inflation in the coming months. Inflation is a big concern for policymakers because it directly impacts the lives of most Americans.

OPEC agreement to cut oil output

OPEC has made it clear that they are ready to slash oil output to stabilize the world’s energy markets. However, it’s unclear what the exact terms of the agreement are, and how the cuts will affect the United States. The OPEC cuts are meant to help lower prices in lower and middle-income countries, which have already been hit by the high price of energy. The cuts will be voluntary, but it’s unclear how much will be reduced.

The oil price has fallen dramatically since last spring, after the United Kingdom asked Saudi Arabia and the United Arab Emirates to increase production. As a result, the price of crude oil crashed because there weren’t enough buyers. However, producers were willing to pay people to buy their oil. Ultimately, the move to cut production was widely seen as a tactic by Saudi Arabia to support oil prices. Oil prices peaked over $120 a barrel in the spring but then began to fall as concerns about the global economy became increasingly acute. By the end of September, they were trading at less than $90 a barrel.

This could have an impact on US gasoline prices. Prices have already started to creep higher in the US, and the OPEC agreement to cut oil output could add to inflation, which could raise the pressure on the Federal Reserve to raise interest rates. The cut is likely to have a limited impact on gas prices, though, because many smaller OPEC producers were already struggling to meet their previous production targets.

Expectations for future inflation

The expectations of consumers are a powerful tool for forecasting inflation. The January 2022 Survey of Consumers conducted by the University of Michigan showed that consumers expected inflation to reach 4.9 percent in the next year. However, the preliminary February results indicate that consumers expect inflation to rise to 5 percent, or higher.

There are several ways to measure expectations for future inflation. The Fed’s Survey of Professional Forecasters (SPF) is one source. This survey asks economic forecasters to provide forecasts for inflation over one, five, and ten years. The median estimates of these forecasts are displayed in a chart. The one-year forecast corresponds to the year after the date on the axis, while the 10-year forecasts represent the corresponding average rate over ten years.

Another indicator of expectations is the difference between nominal and inflation-indexed bonds. The SPF forecasts have the highest accuracy, though the Michigan survey has flaws. In the last decade, the survey has consistently over-predicted inflation by about 0.8 percentage points. The other indicator is the bond yield-based index, which is volatile and heavily influenced by financial market conditions.

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