Rapidly rising commodity prices are beginning to have a marked impact on
inflation, real spending and the external trade balance. Over the past six months,
agricultural commodity prices have increased by more than 60%. The rise in
energy prices has been more muted, but the effects of that increase tend to feed
through more quickly. Headline inflation rebounded to 1.5% in December and
over the next few months will accelerate to 2%. Higher prices for basic goods
will hit real incomes and consumption, offsetting some of the boost from the new
payroll tax cut. Finally, higher food prices are proving to be a boon for the trade
deficit since the US is a net exporter of agricultural products.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services