Disinflationary Forces Easing

The disinflationary effect from supply chains, food and oil seems to have come to an end but apart from the latter are not yet adding to price pressures. G20 inflation eased to 5.5% y/y in June from 5.9%, the OECD to 5.7% from 6.5% and non-Japan Asia ex China was steady at 3.8%. Data where it is available are showing a further moderation in inflation in July but there is a risk of higher headline before year end.

• The NY Fed’s global supply chain pressure index rose in July to -0.9 from -1.14, the highest since February. It is still negative and so supply chain bottlenecks continues to ease but less than earlier this year.
• Brent crude rose to $80.11/bbl on average in July and in August so far is $85.29. While this is still down 12.6% y/y, it is up from -23.9% in July and has risen 13.8% since June. This move is likely to be seen in monthly CPIs soon.
• FAO food prices remained weak in July. It was too early for the impact of Russia pulling out of the Black Sea grain export agreement and India’s restrictions on rice exports to be felt. Food prices fell 11.8% y/y up from -20.9% in June, and seem to have troughed around mid year.
• All components were down in July except for oils. Only sugar is higher on the year at 29.6% y/y and oils have seen the sharpest drop at -23.1% after rising strongly in 2022 due to Russia’s invasion of Ukraine. Cereals are still down 14.5% y/y.

Source: MNI - Market News/Refinitiv