GLOBAL MACRO
The moderation in headline inflation stalled in the year to May but the OECD countries we have for June saw some further improvement but core was mixed. Non-Japan Asian headline and core aggregates were little changed in May and June. Factors that pressured inflation lower have stabilized or are now inflationary, such as shipping costs and oil.
- Shipping costs were disinflationary until the start of 2024 and have become more inflationary over Q2 as continued Houthi attacks and capacity constraints push up prices. Global container rates remain below 2021’s peak but the July average is up 296% y/y while the Baltic Freight index is +87.4% y/y.
G20 CPI vs FBX global container rate y/y%
Source: MNI - Market News/Refinitiv
- Oil prices have added upward pressure to headline inflation in 2024 with Brent up 6.6% y/y but they fell on the month in May and June after rising the previous four months. The July average is up 3% m/m but prices have been volatile.
- The New York Fed June global supply chain pressure index is around neutral signaling little impact on inflation in the months ahead. It has been disinflationary for over a year.
- June FAO food prices were flat after rising for the previous 3 months. They are still down 2.1% y/y but their downward pressure on inflation is significantly less than it was in H1 2023 when they troughed at -21.5% y/y in May. Rice prices have been a problem for Asia but they fell in June and are down 1.2% m/m in July to date after rising sharply in May. Harvests are helping to increase supply but processed rice prices are still +19.8% y/y. Oils and dairy have positive annual inflation.
- Metals were higher in Q2 after falling, while iron ore has declined over 2024. Wool prices continue to fall. The GS commodity index is headed for its third straight decline in July and is now up only 1.4% y/y.
G20 CPI y/y% vs oil & food prices
Source: MNI - Market News/Refintiv
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