May 6, 2022
Inflation Is Not the Only Challenge
Statistics Canada reported higher inflation in February 2022. The Consumer Price Index rose 5.7% compared to a year ago as of February 2022. Commodity prices have skyrocketed as a result of the current Russia-Ukraine conflict. The two countries are major exporters of commodities such as oil, aluminum, nickel, copper and wheat. They respectively account for 17%, 10%, 22%, 9% and 26% of the global supply. The markets have been aggressively repricing these commodities as shown in the table below. Supply is unlikely to be restored anytime soon as Ukraine is being attacked and Russia sanctioned. The bad news is these commodities are consumed directly or indirectly in our everyday life; the price hikes are effectively impacting everyone. Employees have enjoyed wage growth in 2021 and will likely again in 2022. December’s Labour Force Survey, as conducted by Statistics Canada, indicated that average wages gained 2.7% over 2021. However, they were not enough to offset inflation. What has helped consumers to overcome inflation were their “COVID-19” savings and low borrowing costs. As inflation continues to rise while savings are depleted and borrowing costs increase, consumer resilience to inflation will be tested in the coming months…
Read the full article by Alfred Lam, CFA here: