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Inflation is spiking around the world – not just in U.S.

22 Comments
By Christopher Decker

The 9.1% increase in U.S. consumer prices in the 12 months ending in June 2022, the highest in four decades, has prompted many sobering headlines.

Meanwhile, annual inflation in Germany and the UK – countries with comparable economies – ran nearly as high: 7.5% and 8.2%, respectively, for the 12 months ending in June 2022. In Spain, inflation has hit 10%.

It might seem like U.S. policies brought on this predicament, but economists like me doubt it because inflation is spiking everywhere, with few exceptions. Rates averaged 9.65% in the 38 largely wealthy countries that belong to the Organization for Economic Cooperation and Development through May 2022.

What revved up those price increases starting in early 2021?

Scarcity put pressure on prices everywhere

When the COVID-19 pandemic began, demand for computers and other high-tech goods soared as many people switched from working in offices to clocking in at home.

Computer chip manufacturers struggled to keep up, leading to chip shortages and higher prices for a dizzying array of devices and machines requiring them, including refrigerators, cars and smartphones.

It’s not just chips. Many of the goods Americans consume, such as cars, televisions and prescription drugs, are imported from all corners of the world.

Supply chain strains

On top of problems tied to supply and demand changes, there have been major disruptions to how goods move to manufacturers and then onto consumers along what’s known as the supply chain.

Freight disruption, whether by ship, train or truck, has interfered with the delivery of all sorts of goods since 2020. That’s caused the cost of shipping goods to rise sharply.

These massive shipping disruptions have exposed the disadvantages of the popular just-in-time practice for managing inventory.

By keeping as little of the materials needed to make their products on hand, companies become more vulnerable to shortages and transportation snafus. And when manufacturers are unable to make their products quickly, shortages occur and prices surge.

This approach, especially when it involves the reliance on far-flung suppliers, has left businesses much more susceptible to market shocks.

Labor complications

The beginning of the pandemic also sent shock waves through labor markets with lasting effects.

Many businesses either fired or furloughed large numbers of workers in 2020. When governments began to relax restrictions related to the pandemic, many employers found that significant numbers of their former workers were unwilling to return to work.

Whether those workers had chosen to retire early, seek new jobs offering a better work-life balance or become disabled, the results were the same: labor shortages that required higher wages to recruit replacements and retain other employees.

Again, all of these dynamics are occurring globally, not just in the U.S.

War in Ukraine compounded these woes

Russia’s war on Ukraine, which began officially on Feb 24, has also exacerbated inflation by interfering with the global supply of fuels and grains.

The conflict’s effects are reverberating around the globe and fueling inflation.

Russia is the world’s second-largest exporter of crude oil. Sanctions against Russian imports, combined with Russia halting oil shipments to European countries in retaliation, has led to disruptions in the global oil market.

As Europe buys more oil from the Middle East, demand for oil from that region increases, prompting price increases. Crude prices jumped from $101 per barrel in late February 2022, to $123 a month later. Prices stayed high for several months but by late July were around $100 a barrel again.

Food prices have increased substantially in the U.S. and elsewhere, partly due to this conflict. Ukraine possesses some of the most fertile soil in the world and is the third-largest exporter of corn.

Russia’s destruction of Ukrainian crops and its blockade of Ukrainian exports have led to significant price increases worldwide for agricultural commodities.

How will the world respond?

Support for globalization and international trade has waned in recent years. Given supply chain disruptions and the war in Ukraine fueling inflation, this trend will likely continue.

However, as an economist, I believe the benefits of free and open trade still outweigh current challenges.

In my view, there isn’t anything fundamentally wrong with the globalization that cannot be fixed. But, like quelling inflation and alleviating supply chain bottlenecks, it will take time.

The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts.

© The Conversation

©2022 GPlusMedia Inc.

22 Comments
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Inflation is spiking around the world – not just in U.S.

Duh.

3 ( +3 / -0 )

Duh.

I agree, but if your media exposure is self-limited you could be forgiven for thinking otherwise. Some people on this site, for instance, seem to think inflation is a purely Japanese problem.

0 ( +1 / -1 )

There are places with much worse inflation than either Japan or the US.

-1 ( +1 / -2 )

Thank you truckers! All Biden’s fault! /s

-3 ( +0 / -3 )

My advice is spend all your money before it becomes worthless.

0 ( +1 / -1 )

It’s very simply the consequence out of those demography based unintentional and the intentional (green economy, energy transition concepts for the climate change agenda) global de-industrialisation or in harsher words , a suffocating of capitalism which is always and everywhere only working based on growth at all costs, not on putting the brakes and downgrading. It’s easy to understand, everyone wants to make the same money or more, get the same wages for less work and working hours and less sold products, get paid like before for less produced products and less fulfilled services, get the same or rising payments and interest rents from stock exchange or other investments, bonds, shares etc. Therefore the now artificially strangled economies have to deliver the same or more profits, which is only possible by massively raising the prices for the same or less economic activity as it had been before.

-2 ( +0 / -2 )

There are places with much worse inflation than either Japan or the US.

Yeah? Where as a first world nation?

-1 ( +1 / -2 )

This autumn/winter the UK will be in a recession. Major problems ahead. Britain has the highest inflation rate in the G7.

2 ( +2 / -0 )

There are places with much worse inflation than either Japan or the US.

Yeah? Where as a first world nation?

Some examples in the article handily provided above your comment.

UK, Spain, Turkey, Brazil, Argentina. Are they s-hole countries?

1 ( +1 / -0 )

Yeah? Where as a first world nation?

Rates averaged 9.65% in the 38 largely wealthy countries that belong to the Organization for Economic Cooperation and Development through May 2022

You can see the phrase “largely wealthy” there, right? It’s amazing what you can find out if you actually read the article.

1 ( +1 / -0 )

You can see the phrase “largely wealthy” there, right? It’s amazing what you can find out if you actually read the article.

Don’t get him started. I’ve heard enough about black crime and Democrats for one day.

3 ( +3 / -0 )

UK, Spain, Turkey, Brazil, Argentina. Are they s-hole countries?

Depends.

-1 ( +1 / -2 )

You can see the phrase “largely wealthy” there, right? It’s amazing what you can find out if you actually read the article.

Yes, but no, you’re off and we know there’s inflation around the globe, but since poo runs downhill and when America sneezes everyone catches a cold.

https://www.theguardian.com/business/2022/jul/16/the-uss-selfish-war-on-inflation-will-tip-the-world-into-recession

This column, though, is not about the US. It is concerned with the terrible impact on Britain and countries across the world of America’s selfish disregard when it decides to tackle high inflation with higher borrowing costs. Britain is already feeling the effects of the Fed’s pledge to tackle inflation until it is “defeated”, come what may.

Higher interest rates in the US make it a more attractive place for investors to store their money. To take full advantage, investors must sell their own currency and buy dollars, sending the price of dollars rocketing higher.

Makes perfect sense.

-4 ( +0 / -4 )

The higher cost of transportation is a common thread. Shipping by sea has risen up to 10 times. There is no oil shortage, but global oil companies gouged out record profits over the past six months.

0 ( +0 / -0 )

Yes, but no… we know there’s inflation around the globe

You weren’t admitting it two posts ago.

1 ( +1 / -0 )

Global oil companies have made massive profits and need to be taken to the cleaners with a wealth tax.

0 ( +1 / -1 )

How will the world respond? Who knows? But for the west, more sanctions? More wars?

-2 ( +0 / -2 )

The 9.1% increase in U.S. consumer prices in the 12 months ending in June 2022, the highest in four decades, has prompted many sobering headlines.

The UK economy is spiraling out of control and its inflation rte is expected to hit 15% by the end of the year.

China's inflation rate stands at 2.5%.

-2 ( +1 / -3 )

The 9.1% increase in U.S. consumer prices in the 12 months ending in June 2022, the highest in four decades, has prompted many sobering headlines.

The UK economy is spiraling out of control and its inflation rte is expected to hit 15% by the end of the year.

Hopefully bass will see this. Thank you for your educational input.

China's inflation rate stands at 2.5%.

I wasn’t going to quote this but realized that taking quotes out of context or cutting them short mid sentence is a loser’s trick. So, here you are. Thanks again!

-2 ( +0 / -2 )

Bob FosseAug. 6  11:41 pm JST

The UK economy is spiraling out of control and its inflation rte is expected to hit 15% by the end of the year.

Hopefully bass will see this. Thank you for your educational input.

Why? Doesn't change anything. He asked:

Where as a first world nation?

-3 ( +1 / -4 )

Hopefully bass will see this.

I did.

China's inflation rate stands at 2.5%.

I wasn’t going to quote this but realized that taking quotes out of context or cutting them short mid sentence is a loser’s trick. So, here you are. Thanks again!

To equate China’s economy to the US in terms of the average Chinese citizen is just laughable on average the Chinese make 63% less than the average US citizen, more money is withdrawn and the Chinese have less freedom, choices and extreme government intervention. Naw, that’s quite alright.

-3 ( +1 / -4 )

But imagine where the US will be at the end of 2022.

That’s you and bass’ problem. Well, the main one.

Always dreaming about a future that never comes. That’s a surefire recipe for bitterness and a never ending cycle of “well, just you wait until (November)”

Focus on what’s happening now before the rug gets pulled from under your feet, again.

0 ( +1 / -1 )

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