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Inflation Set to Surge on Food Prices

LONDON--(Marketwire - August 28, 2007), 28 August 2007 -- A combination of falling supply and rising demand for basic food produce is set to bring serious inflationary pressures to central banks later this year.

According to Brian Turner, executive editor of UK personal financial news site, Finance Markets (http://www.financemarkets.co.uk), published by Britecorp Ltd. (http://www.britecorp.co.uk/), the result is going to be a dangerous increase in inflation this Autumn, and threatens consumer spending for the Christmas season.

Extreme weather around the world has already cut harvest predictions among the world's main food producers by between 10%-20%. Flooding in Western Europe and Asia has already destroyed swathes of vegetable crops, while drought in Australia, Canada, and the Caucasus has resulted in drastic reductions of grain harvest predictions.

World demand for basic food produce has also grown sharply, especially in India and China, where economic booms have created Western-style lifestyles and diet. Demand has already forced the price of wheat to reach record highs last week.

Brian Turner says, "The combination of falling supply with rising demand means the inevitable increase in food prices. As these form a core basis of the CPI in the UK for measuring inflation, we can be assured that this will encourage inflationary pressures. Additionally, higher food prices can only lead to lower consumer spending on gifts and other non-essentials for the Christmas period.

"With Britain already experiencing record levels of debt, and a collapsing lending market worldwide, there is no more redundancy left in the economy to help bolster consumer spending. With retailers around the world facing sharp profit falls, there is little room left in economic conditions to encourage affordability through big price cuts, as occurred last Christmas."

Brian Turner adds: "This isn't a problem that is just going to affect the UK. World food prices will exert a global influence on national economies. As many of these suffer from the same problems as the UK of debt and rising interest rates, short-term and long-term, we can expect to see serious inflationary pressures affect the USA and other major economies.

"The biggest danger is that what we're seeing now is not a temporary incidence, but a general new economic trend as the era of cheap food closes."

References:

Food prices on the rise and rise: http://news.bbc.co.uk/1/hi/uk/6909469.stm

Wheat prices reach record level: http://www.investmentmarkets.co.uk/20070824-683.html

FM blog post: http://www.financemarkets.co.uk/2007/07/31/farm-floods-to-fuel-uk-inflation/

# # #


Media Contacts:
Brian Turner
Britecorp Ltd.
+44 1667 455512

Submitted by Asia Release on Tuesday, 28 August 2007 at 3:00 PM
Category: Economy
 
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