Price rises to come

30 October 2009

30 October 2009 | Jake Kanter

Government stimulus packages and demand from Asia could continue to push up commodity prices, according to economic reports.

Robin Jackson, chief executive of procurement consultancy ADR International, predicted in the firm's October business briefing that purchasers would be at the sharp end of inflated prices.

"All that new government-injected money sloshing about in the global economy will drive the prices of commodities, goods and services higher.

"We can already see it starting to happen with key commodities, including copper, steel and oil, rebounding from their earlier lows."

Mark Williams, international economist at UK research consultancy Capital Economics, agreed. He told SM: "Commodity prices are higher even though the economy is growing at a slower rate. Part of that is because of increased liquidity from government aid."

He added that he does not expect demand for commodities to continue to grow, making inflated prices unsustainable.

Alan Braithwaite, a professor at Cranfield University and executive chairman of supply chain management firm LCP Consulting, told SM:

"Commodity prices took an enormous hit during the credit crunch, but all the signs are that they are rising again.

"The Chinese are back in the market and I expect that supply and demand will be much more tightly managed."

Benjamin Williamson, economist at the Centre for Economics and Business Research, also believes price hikes will be driven by Asia.

"Growth in prices in the past few years has principally come from Asia and it is these economies which are still growing."

SMoct2009

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