Although the most recent U.S. inflation report did not set new records like the one from the previous month, it is obvious that high prices will continue for some time. The Consumer Price Index (CPI), a fundamental gauge of inflation that tracks price fluctuations, revealed that prices were 8.5% higher in July than they were a year earlier.
As soon as Americans wake up, they feel the squeeze. The price of everything has gone up, including food and gas.
However, they are not the only ones who are harmed by excessive pricing. The fact that countries all across the world are experiencing inflation shows how interconnected we are and how rising prices have a variety of repercussions.
Rates of Inflation by Country
It’s crucial to remember that each nation determines its inflation rate slightly differently, and geographical factors might also have an impact. For instance, a 10% inflation rate in the United States may not be the same as a 10% inflation rate in Turkey.
Each nation or area of the world has a unique set of inflationary forces. Inflation can be influenced by governmental actions, monetary and fiscal measures, interest rate changes, and even unfavorable weather conditions.
For instance, the price of energy and fuel has been a significant factor in inflation in many nations. According to the U.K. Office of National Statistics, supply chain problems brought on by a cold winter and lower-than-normal wind energy availability have significantly increased energy prices in the country.
Therefore, even though this comparison of inflation rates isn’t exactly apples to apples, it can nevertheless provide us a larger perspective on what’s going on around the world.
Inflation in the United States decreased slightly in July from June’s 40-year high of 9.1% to 8.5%.
In July 2021 and July 2022, egg prices increased by 38%, according to the most recent CPI report. Increase of 14.5% in fresh whole milk. Cereal costs have increased by 16.8%.
Natural gas prices have increased by 30.5%, and the cost of ordinary unleaded gasoline has increased by 44.6%.
According to the U.K.’s Office for National Statistics, between July 2021 and July 2022, inflation in the country increased to a new 40-year high of 10.1%.
What does that look like for the typical consumer? Over the past year, egg prices have climbed by 14.6%. According to the Guardian, the cost of low-fat milk increased by 34%, and the cost of natural gas increased by 95.7%.
For the 12-month period ending in July, consumer inflation in Canada reached 7.6% in part due to higher petrol prices at gas stations. The most significant annual change since January 1983, 8.1%, was recorded in the most recent CPI data, which was influenced in part by high gas costs.
To put things in perspective, customers spent 35.6% more on petrol in July 2018 than they did in July 2021.
According to the National Bureau of Statistics of China, the inflation rate in China increased to 2.7% in July when compared to the same month last year. Food costs increased by 6.3% over the previous year (with major rises in the fresh fruit and meat categories), and fuel for automobiles increased by 24%.
Prices for daily basics including food, clothing, housing, and health care have all grown, as they have in many other regions of the world.
The inflation rate in Japan increased from 2.4% in June to 2.6% in July. Consumer price hikes in Japan have now occurred for eleven months in a row. Due in part to rising food and fuel prices as a result of Russia’s invasion of Ukraine and the weakening yen.
In July, Turkey’s inflation rate increased sharply to 79.6%, a 24-year high. Al Jazeera reports that among the various causes of the country’s rising yearly inflation rate include the conflict between Russia and Ukraine, rising commodity costs, and a decline in the value of the currency since December.
Consumers have been adversely affected by high costs and a depreciating currency to the extent that the country has increased the minimum wage twice since 2022 began.
According to the Australian Bureau of Statistics, the Consumer Price Index in Australia increased 6.1% from June of last year. Rising costs for new homes, fuel, and furniture were some of the factors that contributed to the increase.
High rates of inflation are being experienced by many African nations. With a 7.8% annual increase in July, South Africa’s inflation rate reached a 13-year high, primarily due to rising gasoline and food prices.
Israel’s annual inflation rate, which rose to 5.2% in July from 1.5% a year earlier, marked a 14-year high. Fresh fruit, transportation, housing, and entertainment expenditures were the main causes of the increase, according to Israel’s Central Bureau Of Statistics.
What Is the Cause of Global Inflation?
Market analysts and strategists point to a number of causes for increases in worldwide prices.
The senior global market strategist at Invesco, Kristina Hooper, cites demand-pull inflation and cost-push inflation as two basic examples of why inflation is strong right now.
According to her, demand-pull inflation happens when prices rise as a result of rising demand. Inflation generated by demand could be fueled by higher government spending (for instance, providing stimulus checks).
According to Hooper, customers are more willing to purchase today if they anticipate future price increases, which leads to a self-fulfilling prophesy in terms of inflation expectations.
Cost-push inflation, which is the other form of inflation we’re observing, causes price increases when the supply of products and services is disrupted. Here, high oil and natural gas prices serve as good examples.
According to Hooper, the global pandemic played a significant role in the increase in inflation. She explains, “We turned off [the economy], and then we turned it back on.”
Many nations encountered comparable difficulties with labor sourcing and supply chain disruptions when the economy began to expand once more. Hooper observes “that it contributed to scarcity of supply just as demand increased.”
The global pandemic, according to Patrick J. O’Hare, chief market analyst at Briefing.com, was a significant factor in our inflation problems. Armed with stimulus funds, American consumers were prepared to resume spending when the economy picked up. The labor market needed to expand to accommodate this new demand, but many people were still apprehensive about Covid-19 and weren’t prepared to start working again.
Workers outside of the United States were also concerned about this. “With the sources of production offshore being kind of gummed up by a lack of available labor, the supply chain snarl really exploded,” says O’Hare.
The problems with labor sourcing and the supply chain started to resolve themselves at some point, but the Russian and Ukraine brought about a number of additional supply problems. “If we look at cost-push inflation, one of the key drivers is the higher price of commodities,” which is precisely what happened in the early spring, Hooper continues.
“And it wasn’t just energy. It’s also agriculture.” She reminds us that due to its extensive agricultural resources, Ukraine has long been known as “the breadbasket of Europe.”
Up until 2023, there will be continued Global Inflation
We are all in this together because we are experiencing a pandemic within a global economy that depends on one another for everything from food to fuel.
Hooper is keen to point out that each economy and its brand of inflation are distinct, despite the fact that everyone in the globe is struggling with inflation. It actually depends on the particular elements of that economy.
For instance, both supply and demand influence inflation in the United States. Demand-driven increases in energy and food prices are easier for central banks to control: “If you raise rates enough, you can hit the economy over the head with a sledgehammer and cool demand,” Hooper says.
According to O’Hare, because these nations import oil, the Russian and Ukraine has an effect on European nations including the United Kingdom, Germany, Spain, and Italy.
“There’s only so much energy usage that is discretionary,” Hooper explains. “If it’s cold in the winter, you need to heat your house and so there’s nothing that the European Central Bank can do in raising rates that will help ease energy inflation.”
Due to the conflict between Russia and Ukraine, certain Asian nations also depend on Russia for their supply of commodities, which raises inflation. For instance, Turkey is reliant on Russian oil and natural gas. While this is going on, China is working to achieve energy independence, which helps to moderate the rate of inflation compared to other nations.
When it comes to rising gas costs, what is happening beyond borders or oceans is similar to what we are experiencing here in the US. “People have to make choices in terms of where they’re going to spend their money,” O’Hare says. “And when energy costs keep taking away a larger pie of your disposable income, the trade off is you might have to cut back on discretionary purchases, which then ultimately slows your nation’s rate of economic growth.”
Inflation in the United States didn’t start there overnight, and it won’t end there either. “There are no miracles coming,” Hooper says. “Inflation is going to take time to get down to where the Fed’s target is.”
Hooper also points out that not everything can be controlled by the Federal Reserve. “The Fed can only control demand,” she notes. “It cannot control Russia’s invasion of Ukraine; it cannot control supply chains in China.”
Although it will take time, the Covid situation has improved, and some supply-chain stresses are beginning to ease. However, according to Hooper, there might not be any relief from inflationary pressures until far into next year and possibly even near the end of 2023.