Inflation in Lloydminster & Grande Prairie

Published July 2, 2008

Fuelling inflation

Jul 2nd 2008
From Economist.com

Food and energy prices push OECD inflation to its highest rate since 2001

THE rise in inflation across the world is a big worry for central bankers and policymakers. This week the OECD announced that consumer prices for all items in its 30 member countries increased by 3.9% in May compared with a year earlier, the highest rate since 2001. Energy and food prices are the main contributors, rising by 14.6% and 6.1% respectively in May. If these are excluded, the rise in prices is a far more moderate 2.1%.

(Source: http://www.economist.com/opinion/displayStory.cfm?story_id=11660424&source=features_box4)

Most central banks try to keep inflation between 1% and 3%. This allows for moderate and manageable economic growth without encroaching on a dangerous inflationary spiral. Unfortunately, the current rates of inflation are creating the right conditions for the very inflationary spiral they have so carefully avoided for the past decade or more.

The weak USD has caused many to seek a safe haven for their money, and oil is perceived to be the safest thing around. Until the US gets its economy back on track, high oil prices, and the resultant inflationary pressures, are here to stay.

Inflation’s effects
These high rates of inflation will almost certainly affect all businesses. They will curb consumer demand, drive up business costs, and, ultimately, erode profits. The Lloydminster and Grande Prairie regions will likely benefit from the higher oil and gas prices. The current high prices make it economical for exploration and development of reserves. Come September, expect increased activity in the oil and gas sectors.

But will your business benefit from any flow-on effects from that increased activity? Or will the higher inflation dampen any potential benefits?

The summer is a good time to consider your position and potential outcomes. Planning for rocky roads and muddy waters can put you in a better competitive position and might gain you some market share. Gain sufficient new clients and you might be able to maintain your current profit levels.

— Michael Hogan