Follow on to 2/3 post

by Laura Ehrenberg-Chesler on February 10, 2011

in Commodities,Economic Indicators,Energy,Foreign Markets,inflation/deflation,Investment Strategies

One week ago I posted a blog on rising rates of inflation in emerging economies.  That post addressed the issue of rising rates, tight monetary policy and their effects on economic growth rates.

As a follow on to that post I thought it would be interesting to highlight how inflation, and more specifically food inflation, may negatively affect the price of industrial metals and possibly oil in the short run.

Brazil and China may not be forced to choose between infrastructure spending, and food consumption at this juncture.  But for many emerging economies a choice must necessarily be made.  It is the classic economic trade-off between “guns and butter”.

It will be important to watch this unfolding competition between spending on food, and other necessities that include copper, steel, and energy particularly for investors with exposure to these sectors.  Rising food prices may well put a near term damper on the rising prices of industrial metals and energy.

Leave a Comment

Previous post:

Next post: