By Nathalie Voit

The commodity boom has federal officials worried. While commodity traders and major energy exporters like Russia and Saudi Arabia stand to gain from the post-lockdown surge in demand, consumers and companies are already taking a hit in the form of rising costs for basic commodities like food and gasoline.

Energy markets are experiencing significant inflation worldwide. Oil recently hit a three-year high of over US$80 a barrel, prompting comparisons to the 1970s energy crisis that saw stagnant economic growth coupled with oil-driven inflation spikes. The price shocks have similarly sent natural gas markets soaring.

Food prices have also peaked at their highest levels since 2011, according to the UN. The price surges have been driven by inflation in interconnected industries like the transportation and raw materials markets and reduced grain and sugar-cane production due to recent harvest setbacks in top grower countries like Brazil and Canada.

To offset the rising costs, companies like Minneapolis-based cereal producer General Mills are raising the prices of some of their staple products.

“It’s not just us feeling the effects of rising inflation,” Kofi Bruce, the CFO of General Mills, said. “We are all likely looking at the same headwinds…and are planning to take action.”

Higher costs for raw materials have also dealt a blow to manufacturers’ profits. Prices for a range of products from metal and aluminum to lumber and plastics have shot up, prompting companies like KitchenAid and other household electronics firms to pass on the cost to consumers.

The across-the-board commodity-price increases have revived concerns about stagflation.

“There’s a limit to how many price shocks we can continue to describe as ‘one-offs,'” George Buckley, Nomura’s Chief UK and euro area economist, wrote in a report. “Higher energy prices often lead to lower confidence, particularly at a time when rising virus case numbers could yet scupper the nascent economic recovery.”

The recent price shocks have taken markets by surprise just as central bankers were starting to indicate their intention to reign in stimulus, Bloomberg noted.

“If you think fiscal policy in the U.S. is overdoing it, then commodities could be the final bit needed to ignite a self-reinforcing price spiral,” said Dirk Schumacher, a former European Central Bank economist now at Natixis.

On Tuesday, the Conference Board’s Consumer Confidence Index fell to a seven-month low, falling further in September than at any point since February of this year. The index now stands at 109.3, down from 115.2 in August and a previous high of 128.9 in June.

“Concerns about the state of the economy and short-term growth prospects deepened, while spending intentions for homes, autos, and major appliances all retreated again,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward.”