What effect do high commodity prices usually have on the economy?

High commodity prices often lead to decreased consumer spending because when the prices of essential goods like food, fuel, and raw materials rise, consumers have less disposable income available for other purchases. As these commodities become more expensive, consumers face higher costs for basic necessities, which can result in a reduction in their overall spending on non-essential items. This can create a ripple effect in the economy, as businesses that rely on consumer spending may see a decline in sales, potentially slowing economic growth.

While some may argue that high commodity prices can improve the performance of the manufacturing sector by driving up the value of products, in reality, the increased costs of raw materials can burden manufacturers, especially if they cannot pass on those costs to consumers. Therefore, the typical scenario is that high commodity prices reflect increased costs of living and can constrain the financial capabilities of consumers, leading to decreased spending rather than stimulating growth or indicating stability.