Commodity boom stokes inflation fears

<p>Kia ora,</p><p>Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news it's all about commodities and inflation today.</p><p>Rising commodity prices are no longer news, but the acceleration in their rises is. The <a href="http://www.dce.com.cn/DCE/Products/Industrial/Iron%20Ore/index.html" target="_blank"><strong>iron ore price</strong></a> jumped +10% yesterday. Copper prices rose sharply too. The reason for the sudden move isn't clear, but a suspect is that central banks have been universally signaling that easy money will be here for some time. These sharp rises build on inflation fears.</p><p>And that seems to be borne out in the New York Fed's <a href="https://www.newyorkfed.org/newsevents/news/research/2021/20210510" target="_blank"><strong>national survey of inflation expectations</strong></a>. That shows them up to 3.4% over the next year, up from 3.1% (and before all the international cost pressures have really bitten).</p><p>Also inflating are US state tax revenues. California has <a href="https://www.sacbee.com/news/politics-government/capitol-alert/article251129614.html" target="_blank"><strong>announced</strong></a> a huge +US$76 bln surplus, and a very sharp improvement in the Golden State's economic fortunes.</p><p>A good way to see the recovery in US economic activity is to look at the <a href="https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/cass-freight-index" target="_blank"><strong>CASS trucking activity index</strong></a>. And when you do, you see that the cost of road freight is skyrocketing higher.</p><p>In China, major steelmakers are <a href="https://www.yuantalks.com/chinas-major-steelmakers-hike-prices-amid-soaring-raw-material-costs-futures-hit-record-highs/" target="_blank"><strong>hiking prices</strong></a> sharply.</p><p>In Australia, they are a primary beneficiary of the commodities boom. The