De Standaard Online

Weekly updates

•    Inflation across the whole of the OECD area has risen to 3.5% as a result of rapid rises in food and energy prices. Core inflation, which excludes these items, remains close to 2%.
•    Before 2003 food and energy prices did not systematically increase at a faster or slower pace than other prices, but they were more volatile, so there was a case for excluding them when gauging inflation pressures.
•    But, with headline inflation running above core inflation for almost the whole of the last five years, that argument no longer holds and policy-makers and markets should now be concentrating on headline inflation measures.

•    Inflation is likely to rise in the short-run, not least because the oil price keeps setting new record highs. Last week it broke through $120 a barrel for the first time and one analyst warned of a ‘super-spike’ to $150 to $200.
•    Speculative flows have probably been responsible for some of the recent gains, but the market remains underpinned by strong fundamentals. Growing demand, especially from emerging economies, is hitting a market where supply either cannot or will not be increased sufficiently to match it.
•    It probably needs a significant slowdown in growth in emerging markets to halt oil’s rise.

•    As domestic demand slows in the developed world the emerging world continues to experience strong growth.
•    A combination of infrastructure spending fuelled by historically low interest rates and years of underinvestment and a household consumption boom supported by rising income growth are the catalysts for the strong demand.
•    The implications of robust emerging market demand are far reaching As well as putting a floor under commodity prices, it has partially offset the economic slowdown underway in the developed world and companies with exposure to these regions have benefited tremendously.

De Standaard Weblog op 13 mei 2008 om 11:40 | Link

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