Thursday, June 18, 2009
I recently commented on how increasing food prices weren't getting enough press. Well, it looks like The Economist was reading my mind. Take a look at their graph below, published in their graph-a-day series.
As you can see, food prices in many developing countries have had increases in the past 3 months. But, even for those that have had decreases in the last 3 months, the year-on-year increase in food prices is substantial. For some reason China is excepted from this trend. The trend in South Africa is particularly worrying. Inflation, by itself is not always a problem, but when combined with the endemic unemployment (and underemployment) and poverty it's an ingredient for a recipe of greater social unrest and economic instability. Zuma and his cabinet are going to have to take on this problem, with the others that they face. Good luck to them.
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Your points are very true, but just to let you know that whilst food price inflation in SA is high, well above the target, it has been falling since about August last year... so hopefully the trend will continue, especially if retailers start passing on (possible??) savings given that PPI for food has fallen dramatically for a while, although agri PPI is a bit erratic. There has been quite a bit of talk between various consumer groups and the major retailers w.r.t. to this stuff, although I haven't followed it particularly well, but I'm not overly convinced by what has been reportedly said by retailers in defense of their prices.
Yes, Siobhan, I hope that the prices come down and, particularly, that the prices of foods consumed by 'the poor' decrease. I think it is still the case that though aggregate food prices may decrease, that a decomposition of the PPI may indicate problems with the items consumed more by certain households. I hope to be contradicted though.