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Although the latest US inflation report did not break records like the previous month, it is clear that high prices will remain for some time. The Consumer Price Index (CPI), which measures price changes and is a key indicator of inflation, showed that prices in July were 8.5 percent higher than twelve months ago.
Americans feel trouble as soon as they wake up. Everything has become more expensive, from food to gas.
But they are not the only ones affected by high prices. Inflation affects countries around the world, illustrating how interconnected we are — and how high prices have wide-ranging effects.
Inflation Rates by Country
It is important to note that each country calculates its inflation rate slightly differently, and regional circumstances can also affect the rate. See the article : Top 10 Issues Affecting Real Estate: Report – Commercial Observer. A 10% inflation rate in the US, for example, is not necessarily the same as a 10% inflation rate in Turkey.
The factors underlying inflation in any country or geographic region are complex. Government policies, fiscal and monetary interventions, changes in interest rates, and even extreme weather conditions can contribute to inflation.
For example, energy and fuel costs are the main drivers of inflation in many countries. In the UK, supply chain problems due to a cold winter and lower-than-usual availability of wind power have driven energy costs up sharply, according to the UK’s Office for National Statistics.
So while this overview of inflation rates isn’t a strict apples-to-apples comparison, it can give us a broader view of what’s happening globally.
United States
The US inflation rate of 8.5% in July represents a slight improvement over June’s 9.1%, which is the highest value in 40 years.
The price of eggs increased by 38% between July 2021 and July 2022, according to the latest CPI report. Fresh whole milk increased by 14. On the same subject : Air Travel Consumer Report: Consumer Complaints Drop from April, Still More Than 200 Percent Above Pre-Pandemic Levels | US Department of Transportation.5%. The price of cereals increased by 16.8 percent.
Meanwhile, the price of natural gas rose by 30.5% and unleaded regular gasoline by 44.6%.
United Kingdom
Inflation hit a new 40-year high of 10. Read also : Stop looking for shortcuts in your high-tech career path.1% between July 2021 and July 2022 in the UK, according to the UK Office for National Statistics.
How does this translate to the average consumer? Egg prices increased by 14.6% on an annual basis. Low-fat milk rose 34% and natural gas prices rose 95.7%, according to the Guardian.
Canada
Higher prices at Canadian gas stations are part of the reason why consumer inflation reached 7.6% in the 12-month period ending in July. The previous CPI report showed inflation at 8.1%, the biggest annual change since January 1983, driven in part by high gasoline prices.
For perspective, consumers paid 35.6% more for gasoline this July than they did in July 2021.
China
A year-on-year comparison for July showed China’s inflation rate rose to 2.7%, according to China’s National Bureau of Statistics. Compared to last year, food prices increased by 6.3% (with a significant annual increase in the meat and fresh fruit categories), and vehicle fuel by 24%.
As in many parts of the world, the prices of transportation, education and entertainment have risen, as have daily necessities, clothing, housing and healthcare.
Japan
In Japan, the inflation rate in July was 2.6%, which is an increase compared to the rate of 2.4% in June. This is the 11th consecutive month of consumer price increases in Japan. Part of the reason for these increases is due to higher fuel and food costs following Russia’s invasion of Ukraine and the yen’s decline.
Turkey
The inflation rate in Turkey jumped to 79.6% in July, the highest value in 24 years. While there are many reasons for the rise in the country’s annual inflation rate, the war between Russia and Ukraine, rising commodity prices and the decline of the national currency since December are among them, according to Al Jazeera.
High prices and a devalued currency have affected consumers so much that the state has raised the minimum wage twice since the beginning of 2022.
Australia
Australia’s consumer price index rose 6.1% in June (the latest data available) compared to a year ago, according to the Australian Bureau of Statistics. The increase was partly driven by rising prices for new housing, fuel and furniture.
South Africa
Many countries in Africa experience high inflation rates. In July, South Africa hit its highest level of inflation in 13 years with an annual increase of 7.8%, mainly driven by fuel and food prices.
Israel
Israel hit a 14-year high in July when its annual inflation reached 5.2%; a year ago annual inflation was 1.5%. According to Israel’s Central Bureau of Statistics, fresh fruit, transportation, housing and entertainment costs were the primary drivers of the increase.
What’s Driving Global Inflation?
Market analysts and strategists cite several factors behind the global price spikes.
Kristina Hooper, chief global market strategist at Invesco, cites two textbook examples of why inflation is currently high: demand inflation and cost inflation.
Demand-side inflation occurs when prices rise due to increased demand, she explains. Demand-side inflation can be fueled by increased government spending (for example, by providing stimulus checks).
If consumers expect higher prices in the future, they’re more likely to buy today — and that becomes a self-fulfilling prophecy when it comes to inflation expectations, according to Hooper.
The other type of inflation we see, cost-push inflation, causes prices to rise when the supply of goods and services is disrupted. High oil and natural gas prices are a good example.
The global pandemic had a lot to do with rising inflation, Hooper explains. “We turned off [the economy] and then turned it back on,” she says.
As the economy began to grow again, many countries faced similar challenges with disruptions in labor supply and supply chains. “This contributed to a scarcity of supply just as demand was growing,” notes Hooper.
Patrick J. O’Hare, chief market analyst at Briefing.com, agrees that the global pandemic has contributed greatly to our inflation woes. When the economy restarted, American consumers, armed with stimulus money, were ready to start spending again. The labor market needed to rise to meet this new demand, except that many people were still worried about Covid-19 and were not ready to return to work.
This concern was not limited to workers in the United States. “Because offshore manufacturing sources were kind of choked by the lack of available labor, the supply chain really exploded,” says O’Hare.
At some point, labor procurement and supply chain problems began to resolve themselves — but then Russia invaded Ukraine, creating a host of new supply problems. “If we look at cost-push inflation, one of the key drivers is higher commodity prices,” adds Hooper, which just happened in the early spring.
“And it wasn’t just energy. It is also agriculture.” Ukraine, he reminds us, has always been considered the “breadbasket of Europe”, due to its rich agricultural offer.
Global Inflation to Continue into 2023
Living through a pandemic within a global economy that relies on each other for everything from fuel to food means we’re all in this together.
Still, while the whole world deals with inflation, Hooper is quick to note that every economy is unique, just as the type of inflation in every economy is unique. It actually depends on specific factors in that economy.
For example, inflation in the United States is driven by supply and demand. Some of the increases in energy and food prices were demand-driven, which is 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,” says Hooper.
European countries, including the United Kingdom, Germany, Spain and Italy, were affected by Russia’s invasion of Ukraine, according to O’Hare, because those countries are oil importers.
“There’s only so much energy use that’s discretionary,” Hooper explains. “If it’s cold in winter, you have to heat your house and so the European Central Bank can do nothing to raise rates to help ease energy inflation.”
Some Asian countries also rely on Russia for goods, raising inflation due to the war between Russia and Ukraine. Turkey, for example, is dependent on oil and natural gas from Russia. Meanwhile, China is striving for energy independence, which is contributing to an inflation rate that is lower than increases in other countries.
What happens across borders or oceans is no different than what we see in the United States with high gas prices. “People have to decide where to spend their money,” says O’Hare. “And when energy costs continue to take a larger slice of your disposable income, the trade-off is that you may have to cut back on discretionary purchases, which then ultimately slows your country’s economic growth rate.”
In the US, inflation did not happen overnight and it will not stop overnight. “Miracles don’t come,” says Hooper. “Inflation will take time to reach the Fed’s target.”
Hooper also reminds us that some things are beyond the Federal Reserve’s control. “The Fed can only control demand,” she notes. “He cannot control the Russian invasion of Ukraine; cannot control supply chains in China.”
Although it will take time, we are starting to see some supply chain pressures easing and the Covid situation has improved. Still, according to Hooper, we may not see a reprieve in inflationary pressures until well into next year, and perhaps even as late as 2023.
Does the US have the worst inflation?
Looking at the latest monthly inflation figures, more than a dozen OECD members had a higher inflation rate than the United States’ 8.6%. It was mostly Baltic and Eastern European nations that were particularly hard hit by the consequences of Putin’s invasion of Ukraine.
Where does the US rank in terms of inflation?
Is inflation higher in the US?
WASHINGTON (AP) â Rising gas, food and rent prices catapulted U.S. inflation to a new four-decade high in June, further squeezing households and likely sealing the case for another big rate hike by the Federal Reserve, amid more borrowing costs that follow.
Why inflation so high in usa?
Seized global supply chains. With demand rising and supply falling, costs have soared. And companies have found that they can pass those higher costs on in the form of higher prices to consumers, many of whom have been able to build up savings during the pandemic.
Why is UK inflation so high?
Why is the UK inflation rate so high? Higher energy prices are one of the main reasons why the inflation rate is so high. The Russian invasion of Ukraine has led to even greater increases in the price of gas.
Why is the UK inflation rate so high? Why is the UK inflation rate so high? Higher energy prices are one of the main reasons why the inflation rate is so high. The Russian invasion of Ukraine has led to even greater increases in the price of gas. Since May, the price of gas has doubled.
Why is inflation higher in the UK than europe?
The UK imports much of its energy and is highly exposed to rising gas and oil prices, exacerbated by the war in Ukraine. While the UK government is supporting consumers with discounts on energy bills, other countries have taken more direct measures.
What happens if inflation is too high UK?
This means they may have to spend more on food, energy bills and car charging. It’s also bad for savers, as historically low interest rates combined with rising inflation mean they have less chance of seeing any real return on their money.
Why doesn’t Poland use the euro?
Poland does not meet the 2 criteria of exchange rate stability and long-term interest rates. Moreover, Polish law is not fully aligned with the EU Treaties.
Why doesn’t Hungary use the euro? Hungary originally planned to adopt the euro as its official currency in 2007 or 2008. Later, January 1, 2010 became the target date, but that date was abandoned due to excessively high budget deficit, inflation and public debt.
Which 3 countries do not use the euro?
Eight countries (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania and Sweden) are members of the EU, but do not use the euro.
Does Poland accept the euro?
Solving country-specific problems Number of EU countries that do not use the euro as their currency; the countries are Bulgaria, Croatia, the Czech Republic, Denmark, Hungary, Poland, Romania and Sweden.
Why is Japan inflation so low?
Extensive purchases of government bonds by the Bank of Japan enabled the Japanese government to subsidize goods and services on a large scale. Estimates show that about 50 percent of goods and services in Japan’s consumer basket — used to measure consumer price inflation — are subsidized.
Why is Japan suffering from deflation? Why did the Japanese economy fall into deflation and face difficulties in coming out of it for a long time? In my view, this is basically because the natural rate of interest fell rapidly, due to the stagnation of the potential growth rate, the bursting of the bubble and the financial crisis that followed (Chart 2).
Why is the inflation rate so low in Japan?
Wages have barely grown in the last 25 years. This is in stark contrast to economies like the US, where businesses tend to pass on higher input costs to customers, who in turn demand higher wages. This explains why core inflation in Japan remains low, remaining in negative territory until recently.
Does Japan have low inflation?
Inflation in Japan has remained low as economic activity remains persistently weak. Japan’s average growth since its 1989 crisis has been 1.2 percent, while the US has grown at an average growth rate of 2.5 percent over the same period.
