Published on Monday, October 17, 2022

Global | Commodities, at the whim of supply and demand

At the height of the storm, we are seeing the world slowing down as inflation remains high, partly due to high commodity prices... a relentless bidding war between supply and demand from which neither will benefit.

Key points

  • Key points:
  • It has been an unprecedented year for commodities. Firstly, low investment amid increasing levels of demand led to an upward trend in prices that was exacerbated by Russia’s invasion of Ukraine.
  • Shortly thereafter, amid much speculation and concern, the markets saw the specter of rampant inflation, which prompted a resounding response in terms of monetary policy, in the form of rate hikes of the kind not seen in decades.
  • This combination of high inflation and rate hikes fueled fears – which are now coming to be realized – of a major global economic slowdown, or even an outright recession in several countries around the world: Europe is perhaps the first in line due to the added problem of gas supplies, although the US might follow suit towards the middle of next year.
  • For now, commodity prices look set to remain high in light of the intrinsic strength of global economic activity, and this could ultimately prolong the slowdown or even bring not only developed economies, but also other regions, closer to the brink of recession.

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