Is Inflation Set to Rise? 5 Global Indicators to Watch

Inflation Risks: A Cautionary Outlook

Inflation may see a resurgence, albeit temporarily, due to opposing winds affecting the global economy.

As highlighted in an analysis on Bloomberg, various signals from markets and macroeconomic data urge caution regarding the downward trajectory of consumer prices.
While it is undeniable that inflation has cooled from last year’s record highs, encouraging central banks to cut rates, the risks of shocks—however fleeting—that could spike prices are equally real.

From the Iran-Israel conflict to port strikes in the U.S.
and labor market data from the world’s top economy, there are at least five warning signs regarding inflation that emanate from the markets.

1.
War and Oil Prices

Oil prices surged nearly 3% following Iran’s missile attacks on Israel.
Tel Aviv has promised retaliation, threatening to target Iranian oil infrastructure.

Yeap Jun Rong, a market strategist at IG, noted, “Initially, concerns about geopolitical risks in the Middle East led to market unease, but traders remain vigilant regarding potential Israeli responses.”

Rising crude prices could increase costs for consumer goods and services significantly.
Market analyst Tony Sycamore expressed skepticism about Israel targeting Iran’s oil facilities, as such an action could push oil prices towards $80, which would concern Israel’s allies committed to combatting inflation.

2.
U.S.
Port Strikes

Strikes at U.S.
ports are expected to be temporary, recalling the Fed’s earlier views on transitory inflation.
However, prolonged strikes can significantly raise shipping costs, with container ships unable to unload, causing congestion at U.S.
ports.

This bottleneck limits shipping capacity and may result in higher transportation rates as goods are rerouted through longer, costlier logistics paths.
Bloomberg Intelligence predicts additional surcharges if the strikes persist for several weeks.

3.
Hurricane Helene

The devastation from Hurricane Helene may lead to semiconductor shortages, as two mines producing essential materials for chips shut down due to the storm.

Manufactured goods, especially in electronics and automotive sectors, rely heavily on these chips, and a scarcity could pressure prices upward.

4.
Industrial Prices

Six of the ten Federal Reserve reports have sounded alarms about inflation and companies’ pricing power.
For instance, Philadelphia factories noted the highest price increases since December 2022, with nearly all businesses not perceiving any inflation relief, indicating they are either paying the same or higher prices this month.

5.
U.S.
Labor Market

This week’s JOLTs report revealed more job openings and lower turnover rates.
Concurrently, ADP data indicated that annual pay increases for job-switchers surpassed that of non-switchers by nearly two percentage points.

With labor still in demand, this could result in significant workforce mobility, leaving certain positions unfilled, potentially leading to wage inflation.