This is a dramatic price development we are now seeing. Oil and gas prices have skyrocketed. Equinor delivered an astronomical profit in 2021, to the great delight of shareholders. The bill passes on to, among others, Yara, which produces fertilizer, a very power-intensive production. Yara passes the bill on to the farmers, who have to pay more for the fertilizer, a critical input factor in agriculture. The farmers are in trouble, and have to increase the price of their goods. Wholesalers and grocery stores are raising prices. At the end of the chain, you and I are consumers and have to pay significantly more for food.

The problem is just that much of the purchasing power has already been eaten up. For several months now, we have all had scorching extra bills on electricity, heat and fuel. The budget is tight. Then something must be cut, and first, of course, unnecessary consumption is sacrificed.

Commodity prices and transportation costs are running rampant

The vast majority of raw materials and input factors have become more expensive. The Bloomberg Commodity Index is 30 percent higher than a year ago. Brent oil has risen by 50 percent and natural gas by 30 percent in one year. A quick look at the commodity index shows that cotton has risen by 40 percent, timber by 26 percent, wheat by 19 percent and copper by 15 percent. Just to name a few.

On the Esplanade in Copenhagen, billions are pouring in at the container shipping company Maersk, at almost the same pace as the cash register is filling up at Equinor. With freight rates about 80 percent higher than a year ago, shareholders are smiling from ear to ear. In direct contrast, we find extremely dissatisfied customers who have to pay a sky-high shipping cost and find themselves in unstable deliveries. Shipping costs propagate at higher prices throughout the value. The increase in shipping costs is in addition to the increase in raw material prices.

But it does not stop here. Inflation, which is rising sharply over large parts of the world, is putting pressure on wages. Without a corresponding increase in wages, you and I will have less purchasing power. In a tight labor market, companies must accept high wage increases, which we have clearly set at, for example, Amazon and Walmart. Here at home, LO announces a large wage demand in the main settlement.

Interest rates are rising

As if that were not enough, we are also affected by higher rents. This makes it more expensive to service debt or make investments. Even the long-standing European Central Bank, ESB, is now open to rent increases. Long-term market interest rates have risen markedly over the past six months, and so have mortgage rates. Purchasing power is further weakened.

What does this mean for economic growth? For the companies’ earning capacity, and thereby the valuation? These are very central but difficult questions. The recent significant volatility in stock prices – sharp declines replaced by large increases – among investors is highly uncertain. Many companies have recently reported fourth quarter results, and then a recurring question has been whether they can pass on cost increases to the customer. Those who can do better than those who must see margins fall.

Inflation seems to be picking up fast, central bank governors are sitting on the edge, and investors are looking for safe havens. Meanwhile, the situation in Ukraine is sharpening day by day. It’s nervous now. It makes a big difference between winners and losers. Fortunately, both provide opportunities to be dry to take risks.