Sky's Ian King says the wealth of commodities rising sharply in price following Russia's invasion of Ukraine will hurt but they are unlikely to lead to a global recession.
They add:"This year, a recovery in oil demand along with our commodity strategists' revised oil price forecasts would imply an increase in the spending on crude and related products by consumers from $1.4trn in 2020 to $3.6trn in 2022, an effective income transfer of $2.2trn or 2.3% of global GDP."
Ukraine is well known as the bread basket of Europe and it and Russia were together, during the current season, expected to account for 30% of world barley exports, 28% of global wheat exports and 19% of global corn exports. The impact of some of these movements will be felt far and wide. For example, Ukraine overtook the United States last year as the bigger supplier to China of corn, a key foodstuff in the country.
As analysts at the consultancy Capital Economics noted today:"The pass-through from agricultural commodities prices to consumer prices tends to be quite weak, so this effect might add 0.2 to 0.4 percentage points to headline inflation in developed markets in the next few months.
Shipping routes could also be subject to disruption and this too will add to costs. There is already evidence of some shipping companies charging a premium to reflect the added risk of sailing in the vicinities of Russia and Ukraine.
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