The recent sharp rise in commodity prices of raw materials, the impact on emerging economies will be much greater than Europe and North America, especially in emerging Asia. In the new crown pneumonia epidemic is not yet solved, so emerging countries central banks may try to avoid raising interest rates, but at the same time will also face the most severe inflation challenges, may repeat the last commodity price hike triggered by social unrest.
Raw material commodity prices and business input prices are closely related. The U.S. Producer Price Index (PPI) rose well beyond forecasts in April, reaching the largest increase in more than a decade, but has been developed because the nature of the economy continues to change, so that the impact of higher prices of basic raw materials on overall inflation declined.
However, Bloomberg information senior financial markets columnist Ou Thistle (John Authers) pointed out that the impact of commodity price increases on emerging economies is still large, if you observe the proportion of raw materials accounted for the final consumption of Asia, you can find that the impact of commodity price increases on emerging Asia is much greater than Europe and North America, while the southern African countries rely more heavily on raw materials commodities.
Moreover, the development of the country’s raw material commodity price increases are usually longer, and show a wave-shaped changes. BNP Paribas research shows that input prices in emerging markets have now risen significantly. The last experience shows that input prices in emerging markets remain high for up to two years, before gradually declining.
The last commodity price increases in emerging markets also triggered social unrest. 2011 “Arab Spring” outbreak of the proximate cause, is the Tunisian people protesting against soaring food prices, India, Egypt and Indonesia at the time also because of food problems and riots.
Now, the price of raw materials may make emerging markets again into turmoil. For example, Brazil and India are being hit hard by the new pneumonia epidemic countries, the people’s food affordability is even weaker.
However, the new crown epidemic is not yet resolved, the central banks of emerging economies may tolerate higher inflation for a longer period of time to continue to support the economy, but the immediate threat of severe inflation, posing a challenge to society and the economy.