Gasoline, oil, copper - raw materials are becoming more expensive. Is this a threat to the decline in inflation?

Over the last two months, we have been learning about inflation readings from the United States. In each of these cases, whether in inflation for January or for February, inflation data CPI turned out to be higher than the market consensus. In other words, the decline in inflation is not as fast as economists expected at this point, and there are other factors around the corner that could thwart plans for further disinflation.

Will inflation come again from the raw materials side?

Since the December low gasoline prices in the United States (futures) increased by approximately 30% to the highest level since September 2023. Oil prices they are up 18% since December, and the CRB broad commodity price index is up 8% since December. There is a strong relationship between commodity prices, e.g. represented by CRB, and CPI inflation in the US. The correlation between CRB changes y/y and CPI inflation is 0,7, hence it seems that in the absence of a lasting decline in commodity prices, it may be difficult to achieve further disinflation, especially in the second half of the year.

Industrial metals up, led by copper

The price of copper on world stock exchanges rose this week to the highest level since August 2023. From the low in October 2023 to the current peak, this means an increase of 13% and perhaps an attempt to attack demand on the upper limit of the sideways trend that has been forming on copper since May 2023. Copper has recently become more expensive along with gold and silver, which shows the general boom in metals. Nevertheless, another factor may have appeared for the copper market, this time a supply one.

Top Chinese copper smelters have reached a rare agreement to jointly begin production cuts at some loss-making plants as they try to deal with raw material shortages, according to sources with knowledge of the matter. No specific rates or amounts of cuts have been set and each mill will make its own assessment of the reductions it wants to implement.

Nevertheless, this may be another growth factor for copper prices on global markets, and another may be the US dollar. If the USD were to start a new wave of weakening, the commodities priced in it could experience another greater impulse.

Therefore, it is worth keeping an eye on the commodity market to keep an eye on inflation, because currently there is no mention anywhere that inflation will be persistent. It should also be added that if we are currently in the equity quarter of the cycle, the next quarter is the raw material quarter...