Emerging market cost inflation hits three year high

Emerging markets are experiencing the highest input cost inflation rates since the soaring prices of 2008, according to an economics report from HSBC.

The HSBC Emerging Markets economic index rose to 55.7 in the fourth quarter of 2010, up from 54.2 in the preceding quarter. A rapid build up of inflationary pressures was highlighted by a climb in the input prices index of nearly six points over this time.

Higher commodity prices, the impact of loose monetary policy in America and low stock holdings at suppliers have led to a surge in inflation.

Companies’ purchasing costs are now inflating at their highest level since the second quarter of 2008, potentially impinging on growth.

Stephen King, the chief economist at HSBC, says cost and price components have not reached such worrying levels since the food and energy scares seen in early 2008. (article continues below)

Emerging nations are expected to turn to ‘quantitative tightening’ measures in order to restrict the availability of credit without having to raise interest rates.

India has recorded a four-quarter low in activity growth, while China has slowed to an eight-quarter low. Russia, a noted commodity producer, has recorded a strong acceleration in growth.