US media: The "perfect storm" of inflation has hit the world

Reference News Network reported on June 12 that steel, wood, plastic and fuel were reported on June 9 on the CNN website. Corn, soybeans, sugar and sunflower oil. House, car, diapers and toilet paper. Prices are rising almost everywhere.

According to the report, the post-epidemic recovery is in full swing, and the global economy is struggling to keep up. After a sharp decline at the start of the outbreak as businesses closed and millions of workers lost their jobs, demand rebounded in retaliation under government stimulus and consumers with well-saved savings.

But businesses that shut down factories during the lockdown or forced workers to take vacations now don't have access to enough raw materials to build homes, produce cars or assemble home appliances, and demand has surged in these areas.

The report noted that companies are trying to replenish inventories, bringing supply chains that have been severely affected by the epidemic on the verge of collapse. Shortages of sea containers and traffic jams at ports have made the situation worse and increased the cost of transporting products around the world.

It is unclear how long the supply outstrips demand will last, especially as the pandemic continues to ravage some of the world's largest economies. But there is already a shortage of various commodities and prices are soaring.

The report also notes that, at least for now, inflation is making a comeback and is widespread. Inflation in OECD member states soared to its highest level since 2008 in April. Rising energy prices have brought average annual inflation in OECD countries to 3.3 per cent. But even if volatile food and energy prices are excluded, prices are rising.

As the economy recovers from the pandemic, the cost of raw materials needed to produce consumer goods and power infrastructure spending is soaring. If approved by Congress, U.S. President Joe Biden's infrastructure proposals would also drive up demand. The surge in investment in green technologies has also boosted strong demand for metals such as aluminum and copper for electric vehicles.

A growing crisis has exacerbated the commodity crisis: the Suez Canal clogging delayed shipments in March; the drought in South America affected corn and sugar production; the bitter cold in Texas and the Ransomware attack on the Coronern Pipeline Transport Company strained fuel markets; and the COVID-19 outbreak in India devastated ports and supply chains.

Warren Patterson, head of commodity strategy at AF, said: "This is really a perfect storm. ”

The latest problem is that major beef and pork producer Brazil JBS suffered a cyberattack last week and was forced to close its factories in North America and Australia. Analysts say the plant subsequently resumed production, but the chaos could lead to a spike in wholesale meat prices. However, commodities are not the only factor driving up prices. Logistics and labor costs are also rising, and labor shortages in some industries could exacerbate pressure on businesses to raise wages further.

For now, at least, central bankers believe that price increases are temporary and unlikely to lead to sustained higher inflation, although some economists, including former U.S. Treasury Secretary Larry Summers and former Bank of England Governor Merving King, have warned.

Economists at Deutsche Bank warned in a research brief this week that "ignoring inflation will put the global economy on a ticking time bomb." ”

Source: Reference News Network