Record oil and metals prices raise inflation concerns

With oil prices trading above $70 a barrel and metals trading at record levels, there are growing concerns on the outlook for inflation, the main theme for this week’s data releases.

Analysts at JP Morgan point out that the cumulative increase in real crude prices since 2002 is close to that of the oil shocks of the 1970’s which produced two global recessions and an unprecedented surge in inflation.

One of the key reasons why the global economic expansion has strengthened during this upswing is that advanced economies are now much less intensive users of oil than in the 1970’s, due to efficiency improvements and a shift towards services.

However, China and other emerging markets are much less efficient users of oil and their increasing share of global GDP is contributing to higher global oil demand.

Financial Times