June 21, 2021

Chart of the Week: Higher food prices – an underappreciated risk

by Fathom Consulting.

Inflation has historically been a politically sensitive issue, with rising food costs especially unpopular with voters. Global food price indices have surged since the middle of last year and have already surpassed pre-pandemic levels. There is currently little sign of any respite. Since food makes up a substantial proportion of the overall CPI basket, the pass-through from higher food prices to headline inflation numbers can be substantial, especially in emerging economies. To the extent that higher prices erode the short-run purchasing power of households, it is unsurprising to find a relationship between the real price of food and political instability. Indeed, Fathom analysis has shown that a 10% rise in real food prices is normally associated with a 30% rise in battle-related deaths (as measured by the Uppsala Conflict Data Program).

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