Colorful fresh fruit and vegetables for sale in local supermarket
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The risk of the global economy facing stagflation — weak economic growth coupled with surging inflation — is on the rise, National Bank Financial Inc. (NBF) warns in a new report.

NBF noted that the global recovery is facing a growing collection of challenges including supply chain disruptions, rising energy prices and shifting industrial policy in China.

“This confluence of factors is looking more and more like a supply shock reminiscent of the early 1970s, when soaring production costs idled industrial capacity and lowered potential GDP for many quarters,” the report said.

At the same time, food costs are rising.

“Earlier this week, the United Nations reported that its Food Price Index (FFPI), which tracks the international price of a basket of food items, is already up 30% in 2021 from its 2020 annual average, the largest increase in 47 years,” NBF said, noting that this pushed the inflation-adjusted index to its highest level since the early 1970s.

“This is a particularly troubling development for emerging markets where food accounts for a large share of the consumption basket,” it said, and emerging markets currently account for about 60% of global GDP.

“Clouds are forming over global economic growth forecasts for 2022,” it concluded.