Global inflation is at its highest level since 2008, what are the major reasons behind the "ups and ups"?

As the epidemic continues, many countries around the world have fallen into the predicament of "rising and rising". From water, electricity and coal to daily necessities, from oil prices to housing prices, almost every aspect of life is increasing prices. According to a new World Bank report, global inflation has been at its highest level since 2008. High inflation is putting enormous pressure on people in many countries. The British Broadcasting Corporation (BBC) reported on the 20th that the reasons behind this phenomenon were analyzed.

Global issues

The Global Economic Prospects jointly released by the Globalization Think Tank (CCG) and the World Bank on the 19th pointed out that inflation has become a global problem. Both globally and in advanced economies, inflation is at its highest level since 2008. Inflation in emerging market and developing economies also reached its highest level since 2011.

The report notes that global inflation has been rising in recent months. On a 12-month basis, the median overall consumer price inflation rate reached 4.6% in October 2021, up from the trough of 1.2% in May 2020.

Since mid-2020, the rebound in global demand and economic activity, coupled with supply disruptions and rising food and energy prices, has pushed headline inflation in many countries to a decade-high. Core commodity price inflation has also risen globally. Housing prices have also risen in some economies. Inflation has led many central banks to partially lift their accommodative monetary policies.

Rising prices are affecting the lives of more and more ordinary families.

In December, the U.S. Consumer Price Index (CPI) rose 7 percent year-on-year, the biggest year-over-year increase in 40 years, with some people at the bottom cutting back on food and clothing and eating only one meal a day.

In Seoul, South Korea, many restaurants frequently change their price lists due to the sharp rise in the price of imported meat. A restaurant owner said the price of imported meat, which used to be 15,000 won (about 80 yuan) per kilogram, has risen to 35,000 won (about 190 yuan).

Turks are also worried about soaring prices. Istanbul stall owner Douglu said: "When you wake up, the price goes up. I bought a 5 liter can of cooking oil and spent 40 lira. Buy it again, it's 80 LIRA. The next time I go, it will already be 100 lira. ”

The same is true in Brazil. In the past year, prices in Brazil have risen from hydropower and coal to travel and dining. In São Paulo, Brazil's largest city, people took to the streets to protest soaring prices.

Multiple factors

The analysis believes that the global price increase is related to the following seven factors:

First, energy prices have risen.

Oil prices fell in the early days of the COVID-19 outbreak, but as demand soared, oil prices reached a seven-year high this week. U.S. gasoline prices now average $3.31 per gallon, up nearly 40 percent from $2.385 a gallon a year ago. In Europe, oil prices are showing the same trend.

At the same time, natural gas prices are also rising, causing heating bills to rise in many homes. The analysis believes that demand in Asia has driven prices up, while the cold winter in Europe has also accelerated the consumption of natural gas reserves.

Second, there is a shortage of goods.

Under the epidemic, the prices of many daily necessities have risen. On the one hand, the demand for daily necessities by consumers who reduce the number of people who go out has surged; on the other hand, many manufacturers have had to stop work under the lockdown, resulting in a disconnect between supply and demand.

Globally, the shortage of plastics, concrete, steel and other materials has greatly increased the price of consumer goods. Major U.S. retailers Nike and market openers have raised prices because of rising supply chain costs. In addition, the global chip crisis has also led to an increase in the price of household goods such as automobiles and computers.

Third, transportation costs have risen.

Since the second half of 2020, with the rising demand for shipping, global shipping has faced challenges such as insufficient capacity and rising freight rates, especially the continuous shortage of empty containers and the decline in turnover rate, resulting in an amazing increase in transportation costs.

For example, shipping a 40-foot container from Asia to Europe now costs about $17,000, compared to just $1,500 before the pandemic, an increase of more than 10 times.

At the same time, global air freight costs have risen, and Europe has a serious shortage of truck drivers. The new strains have led to global transportation bottlenecks that remain unabated, and these costs will be spread equally among consumers.

Fourth, wages have risen.

During the epidemic, many people chose to leave their jobs or change jobs, resulting in difficulties in recruiting workers and forced to raise salaries.

The "wave of departures" is particularly prominent in the United States, and the number of departures has repeatedly set new historical records. Especially in the service industry such as hotels and catering, a large number of personnel are lost, and enterprises are in trouble. According to a survey, 94 percent of the 50 major U.S. retailers said they had difficulty recruiting.

To this end, McDonald's, Amazon and other companies have given 200-1000 US dollars of salary increase conditions. This part of the additional cost of the enterprise is eventually passed on to the consumer side.

Fifth, climate impacts.

In 2021, there will be extreme weather in many parts of the world, which will have a certain impact on inflation. Last summer, for example, Hurricanes Ada and Nicholas transited through the Gulf of Mexico, damaging U.S. oil facilities and dealing a blow to global oil supplies. Last winter's snowstorm led to the closure of factories in Texas, U.S.A., exacerbating the shortage of microchips. In addition, Brazil, the world's largest coffee producer, suffered a severe drought, which led to higher coffee prices.

Sixth, trade barriers.

Rising import costs have also led to soaring prices. For example, after Brexit, in the first half of last year, the total imports of goods from the EU fell by a quarter. Another example is that U.S. import tariffs on Chinese goods have also caused U.S. consumers to pay for higher prices.

Seventh, the bailout policy.

In response to the economic crisis caused by the epidemic, governments around the world have provided financial support to businesses and individuals. Rising public spending and borrowing led to higher taxes and higher prices. In some advanced economies, in particular, governments approve paid leave for employees or subsidize low-income groups. Some economists expect the bailouts to end gradually, but these policies could still push up inflation.

Negative effects

Consensus Economics, an economic organization, expects median global inflation to remain high in 2022. Institutions and experts warn that persistent inflation could have a negative impact on the global economy.

In the report, the World Bank pointed out that under the superposition of multiple factors such as the epidemic, inflation, debt, and income inequality, global economic growth is entering a period of significant slowdown, and it is expected that global economic growth will drop from 5.5% in 2022 to 4.1%, and inflationary pressures may drive the risk of "hard landing" in some economies.

The report also notes that rising inflation is constraining monetary policy, particularly for low-income workers.

Relevant experts also said that it is necessary to be vigilant that inflation may further expand the gap between rich and poor. Because the rich tend to have anti-inflation assets, and the less economically capable group, wages will be eroded by inflation, and life will become more and more difficult.

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Column Editor-in-Chief: Yang Liqun Text Editor: Yang Liqun Caption Source: Visual China Photo Editor: Cao Liyuan

Source: Author: Yang Ying