Sticky Inflation Highlights Despite Price Slowdown... Blamed on Raw Materials

Bloomberg Commodity Spot Index
Highest Level in 1 Year
Copper, Gold, Silver, Crude Oil Highlighted

As U.S. consumer inflation slows, raising expectations for an interest rate cut within the year, soaring commodity prices show no signs of easing. Recently, the AI data center construction boom has driven up copper prices, which are used in wiring. As a result, concerns are emerging that "sticky" inflation will not easily subside.

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On the 15th (local time), the Bloomberg Commodity Spot Index, which tracks prices of 24 global commodities, rose 0.75% from the previous day to 517.36, marking the highest level since April 2023.

This year, commodities have mostly risen regardless of type due to manufacturing recovery and geopolitical risks. Copper (20%), aluminum (12%), gold (16%), silver (25%), and crude oil (12%) notably recorded double-digit percentage increases.

Copper prices have surged recently as competition among tech companies to build AI data centers intensifies demand. To process the computations AI requires, large-scale power grids must be established, and copper, used in manufacturing communication cables, is essential. According to the Copper Development Association (CDA) in the U.S., about 27 tons of copper are used per 1 MW of data center construction. Copper prices this month have approached levels seen in March 2022, when concerns over supply imbalances due to the Russia-Ukraine war were prominent.

International oil prices rose ahead of the summer vacation season despite the International Energy Agency (IEA) forecasting a decline in oil demand. The U.S. commercial crude oil inventory decreased for two consecutive weeks, also influencing prices. On this day, June West Texas Intermediate (WTI) crude oil for delivery rose $0.61 (0.78%) to $78.63 per barrel, while the global benchmark Brent crude for July delivery closed up $0.37 (0.5%) at $82.75 per barrel.

Food raw materials such as coffee and cocoa have also surged significantly this year due to poor harvests in major producing countries caused by climate change.

Natural gas, which had shown a significant downward trend, is also stirring. This is because U.S. industry is shutting down wells due to deteriorating profitability, and natural gas is gaining renewed attention amid the surge in AI power demand.

Bloomberg reported, "As U.S. consumer inflation slows and expectations rise that the Federal Reserve (Fed) may begin cutting interest rates in the second half of this year, soaring commodity prices are dealing a major blow to the Fed's efforts to curb inflation." If commodity prices continue to rise, the prices passed on to consumers will increase accordingly.

Earlier on the 15th, the U.S. Department of Labor announced that the Consumer Price Index (CPI) for April rose 0.3% month-over-month and 3.4% year-over-year. This slightly missed the expert forecasts compiled by The Wall Street Journal (WSJ), which expected a 0.4% month-over-month and 3.4% year-over-year increase.

This content was produced with the assistance of AI translation services.