Inflation has become a common concern all over the world. Energy costs such as daily necessities, food, gasoline, water, and electricity have all risen. Global price inflation has reached its highest point since 2008, and tens of millions of households are affected by inflation.
Taipei, TAIWAN (Merxwire) –Inflation has become a question of joint attention around the world. Daily necessities, food, gasoline, and hydropower energy spending, have risen, and the global price increase rate has reached its highest point since 2008. The price of the UK and the USA have grown the fastest in 40 years in the past year, and the monthly living costs of the public have increased a lot. Tens of millions of families have been affected by inflation.
The current situation of inflation in the world
Inflation refers to the general, continuous, and significant increase in the level of price. If the proportion of inflation rates increases higher than the income of people, the life pressure e will increase. Most economists use Consumer Price Index to measure changes in family purchases of daily necessities and living expenses to judge the current inflation situation.
Taking the United Kingdom as an example, in February, the inflation rate reached 6.2%, it’s the highest in 30 years. In July, the data released by Office for National Statistics was 10.1%, which has reached a new high record in 40 years. The price of essential foods such as oatmeal, bread, and meat has risen the fastest, and people are facing the dual pressure of economic recession and rising living costs.
The inflation rate in the United States has reached a high record this year, and it reached 7.9% in February, breaking the number in the past 40 years. Under the pressure of rising energy and housing rents in June, the annual growth rate of CPI reached 9.1%, and then innovated the record, so that the Feds had to control the inflation with a significant rate of interest rate hikes. The larger increase was in gasoline, living costs, and food prices. The price of gasoline has risen to $ 5 per gallon in June this year.
Not only Europe and America but also Asian countries are affected by the global turmoil and prices are rising. In Taiwan, the biggest impact is on food prices. The inflation rate has fluctuated at 7.4% in the past year, second only to India’s 7.8%. Eggs rose the most by 27.98%, vegetables rose second by 22.12%, meat rose by 7.88%, and the cost of eating out increased by 5.88%, the highest in the past 14 years. The main reason is that the increase in imported materials has greatly added to the cost of feeding, and it is also affected by climate change.
In South Korea, the prices of gasoline and eat-out have risen the most, with gasoline rising to a nine-year high of 26%. Eating out rose by 7.4%, prompting many office workers to reduce entertainment spending and even have part-time jobs to increase their income. In Japan, the price of daily necessities such as food and clothing has risen due to the increase in electricity prices and logistics costs.
Possible causes of inflation
Bank for International Settlements believes that after the outbreak of COVID-19, the world’s energy, freight costs, and commodity liquidity have been affected, coupled with changes in the relationship between European and American countries with China and Russia, resulting in rising food and energy prices. Countries that rely on foreign materials have suffered from changes such as the insufficient supply of raw materials, rising material prices, prolonged transportation time, and increased freight costs, resulting in “imported inflation”. They can only respond to various excess expenditures by increasing commodity prices. , the world has entered a new era of high inflation and high-interest rates.
The aftermath of COVID-19 on the world is deeper than expected, and global inflation is one of them. At the beginning of the pandemic, energy prices fell due to the lockdown, various stay-at-home policies, and the suspension of international shipping. In the middle and late stages, due to the increase in demand, the price began to soar. Taking the price of US oil as an example, the average price per gallon was US$2.39 before, and the current average is US$3.31, which has reached the highest level in nearly 7 years. Natural gas prices also continued to soar, especially after the outbreak of the Russian-Ukrainian war.
The rise in energy prices has led to higher transportation prices, and the cost of delivering raw materials and commodities to factories and stores has also increased. Taking the shipping cost of a 40-foot standard container as an example, the cost of shipping from Asia to Europe in the past was US$1,500, but now it has risen to US$17,000, an increase of more than 10 times, so the final retailer has to adjust the price of the product. The cost is thus passed on to the consumer.
During COVID-19, due to the adjustment of lifestyle, many people changed to work from home or transform jobs, and the demand for freight traffic and truck drivers in various countries increased greatly. However, because of the high number of infected people and a serious shortage of personnel, not only recruiting too fewer people, but companies also need to increase wages to attract employees. When the epidemic slowed down, the catering and retail industries began to recover and faced the dilemma of not finding employees. They had to use various bonuses and basic salary increases to stimulate employee recruitment. The increase in labor costs has also become one of the reasons for various industries to rise their prices.
Some industries have stopped during the COVID-19 blockade, and the demand for some industries has increased due to the changes in lifestyles, such as the repair industry and home daily necessities. Some companies and factories choose to decorate and buy equipment during the shutdown period. People also spend more time staying at home, so the demand for home supplies and 3C products increases. Wood, plastic, concrete, and microchips are facing shortages or price incense. These changes have promoted a rise in prices.
In this wave of inflation, some industries have obtained increased profits. For example, energy companies that refine petrochemical fuels, such as Aramco, Royal Dutch Shell, and Centrica, have increased significantly. Because of Russia’s natural gas supply chain cut off, the revenue of the coal mining industry has grown, and the profit in the hot coal part of the mining giant Glencore has set a new record of 15 billion pounds.
During COVID-19, the number of shipping businesses increased significantly, and the supply of containers was in short supply. Various foods price has risen due to insufficient production or supply, for example, wheat rose by 25%. So the revenue of grain trading companies incensed. The investors’ money flows into the high-end watch and wine industry to preserve value, and the sales volume and value of wine have risen. But at the same time, most consumers and companies are still in the difficult situation of rising prices.
With the easing of the epidemic in various countries and the gradual return to normal life, many people are overwhelmed by the rising cost of living. In the past two years, the intensified weather anomalies and the outbreak of the Russian-Ukrainian war have caused serious difficulties in the coffee supply chain, hydropower, natural gas, and food supply, European river transportation costs, and the problems of inflation and price increases have become more serious. Inflation has become an issue that countries have to pay attention to in their economic policies.
The Bank of England predicts that the domestic inflation rate in the UK will likely exceed 13% this year, and the economic recession will last until 2023. Therefore, monetary policy, tax, and spending subsidies will be adjusted to respond to rising prices and help businesses get through difficult times. The Fed is raising interest rates to stabilize inflation. Taiwan’s central bank raised interest rates and formulated related administrative measures in response to food inflation. Economists expect that inflation will not ease in the short term, and it will also affect other consumer expenses of the people.