The pattern of rising commodity prices over the past decade supports the view that the rapidly expanding global middle class has a strong appetite for commodities, argues Dutch asset manager Robeco.
The firm has penned a white paper to discuss the impact this growing body of wealthier consumers could have on global demand and supply. Rising incomes, it notes, point to increased use of cars, greater energy demand, and increased consumption of milk and meat which brings additional demand for grains.
Yet demand for key commodities such as oil and copper are already close to full capacity utilisation rates. At the same time, oil discoveries have lagged oil production and oil continues to decline as a percentage of total energy consumption. There are implications for the ability of central banks to hold back inflation.
Further, the world population is aging, while the labour force looks set to shrink. This would result in a strong rise in the dependency ratio, both in the developed world and emerging economies. The aging trend would also reduce economic growth potential.
Robeco debates whether the rise of a global middle class will cause a fresh round of accelerating price increases in commodities, resulting in a new spike in the next few years. To read the white paper, please click here.