PHOTO GALLERY. From buying groceries to heating our homes, the cost of living is rising sharply, not just in the UK but across the world.
Global inflation, the rate at which prices rise, is at its highest point since 2008. Here are some of the reasons.
1. Rise in energy and gasoline prices
Oil prices slumped at the start of the pandemic, but demand has soared since then, hitting a seven-year high this week.
In the US, gasoline currently costs an average of $3.31 per gallon, up from $2,385 per gallon a year ago. It’s a similar story in the UK and the EU.
The price of gas has also skyrocketed, leaving people around the world with eye-watering central heating bills.
Demand from Asia has pushed up prices, along with a cold winter in Europe last year that depleted gas reserves.
2. Scarcity of goods
The price of many everyday consumer goods has skyrocketed during the pandemic.
Consumers stuck at home during the lockdown last year splurged on household items and home improvements because they couldn’t go to restaurants or on vacation.
Manufacturers in places like Asia, many of which faced closures due to Covid restrictions, have struggled to keep up with demand ever since.
It has caused shortages of materials such as plastic, concrete and steel, driving up prices. Timber cost up to 80% more than usual in 2021 in the UK and was more than double its usual price in the US.
Major US retailers Nike and Costco have raised their prices due to higher supply chain costs.
And there is a shortage of microchips, which are vital components in cars, computers and other household items.
3. Shipping costs
Global shipping companies, which move goods around the world, have been overwhelmed by increased demand after the pandemic.
It means that retailers have had to pay a lot more to get those products into stores. As a result, prices have been passed on to consumers.
Shipping a single 40-foot container from Asia to Europe currently costs $17,000 (£12,480), more than 10 times more than the previous year, when it cost $1,500 (£1,101).
It has been accompanied by a rise in air freight rates and made worse by a shortage of truck drivers in Europe.
Transportation bottlenecks appeared to be easing in December, and the US began to overcome record congestion at its ports.
But Omicron and the appearance of future Covid variants could reverse these gains.
4. Salary increase
Many people have dropped out of the workforce or changed jobs during the pandemic.
In the US, more than four million people quit their jobs in April, according to the Labor Department, the largest increase on record.
As a result, companies are having trouble hiring staff such as drivers, food processors, and restaurant servers.
A survey of the top 50 US retailers by research firm Korn Ferry found that 94% were having trouble filling vacant positions.
As a result, companies have to raise salaries or offer hiring bonuses to attract and retain staff. McDonald’s and Amazon offer signing bonuses ranging from $200 to $1,000.
Those extra employer costs are being passed back on to consumers. Global clothing brand Next has attributed planned price increases for 2022 in part to rising wage costs.
5. Climate impact
Extreme weather in many parts of the world has contributed to inflation.
World oil supplies were affected by hurricanes Ida and Nicholas that crossed the Gulf of Mexico and damaged US oil infrastructure.
And problems meeting demand for microchips worsened after a fierce winter storm shut down major factories in Texas last year.
The cost of coffee also soared after Brazil, the world’s largest producer, suffered a poor harvest following its most severe drought in nearly a century.
6. Trade barriers
More expensive imports are also contributing to higher prices. New post-Brexit trade rules are estimated to have reduced EU imports to the UK by around a quarter in the first half of 2021.
Roaming charges are making a comeback for many UK travelers visiting Europe this year.
On the other hand, US import tariffs on Chinese goods have been passed on almost entirely to US customers. USA. in the form of higher prices.
Chinese telecoms giant Huawei said last year that sanctions imposed on the company by the US in 2019 were hurting US suppliers and global customers.
7. The end of pandemic support
Governments around the world are withdrawing support given to businesses to help with the impact of the coronavirus.
Government spending and borrowing increased around the world during the pandemic. This led to tax increases that have contributed to the reduction in the cost of living, while most people’s wages remain unchanged.
Many developed economies have had policies designed to protect workers, such as furloughs, and welfare policies to protect the lowest paid.
Some economists suggest that these policies could also boost inflation as support measures come to an end.
.
Ricardo is a renowned author and journalist, known for his exceptional writing on top-news stories. He currently works as a writer at the 247 News Agency, where he is known for his ability to deliver breaking news and insightful analysis on the most pressing issues of the day.
