Global inflation 2022 is the biggest ever record of inflation in several countries in decades. Inflation in countries such as the United States of America, Australia, Germany, Italy, and Pakistan is making headlines in the recent market trends worldwide. The USA has hit the highest inflation rate, annually of 7.5% with a straight growth in the rate for three months, the fastest pace ever recorded for the US since January 1982.
It is believed that the disruption in the supply chain in the year 2020 has created a big ruckus in the management of the supply chain and resulted in the shortage of commodities in many countries. Many experts believe that the pandemic of COVID-19 has played a big role in the rise of global inflation in many countries. While supply chain is one of those variables which impacted the inflation rate this year’s January, there are other factors as well…
1. Supply Chain Issues
COVID-19 has heavily affected the supply chain and now, the global supply of goods might be negatively affected in the supply chain. Prices of freights and shipped goods go hand-in-hand. The surging demand after COVID-19 heavily impacted the supply chain by increasing the prices of inbound and outbound shipments around the world in different countries. Germany’s increase in imports by price surged the highest after 1980 and were 21% due to supply chain issues. On the other hand, Germany’s inflation rate reached around 4.9% in January 2022.
Even though supply chains in December 2021 seemed to improve a lot because of the maintained flow of goods and services throughout the world, new variants of the coronavirus are making things uncertain for future predictions. Drivers shortage in the EU and UK also influenced the rising prices of several goods. Increased labour costs due to the heavy workload for all the labours present is also driving the prices of certain commodities higher.
2. Rising Fuel Demand
Fuel prices have gone higher for the current ongoing year as the demand for fuel increased after the revamp of global transportation and trade flows of goods and services. The demand for global consumption of oil is about 99.13 million barrels per day in the first three months of 2022. Region-wise, Asia accounts for the higher demands for imports of oil in the continent’s countries. Growing tensions between Russia and Ukraine have increased the oil prices and, eventually, the rate of inflation for the products in other countries.
Russia-Ukraine Tensions Deepens, Prices and Inflation High
Australia recorded a consumer inflation rate of 3.5% and fuel prices are the influencing factors. The top imports of petroleum oil (2710) are shown below with their corresponding import values for Australia. Petroleum oil obtained from bituminous minerals are the highest imported mineral fuels & oils in Australia as per international trade statistics 2020-2021. Shown below are the petroleum imports for 2021 in the division of quarters with corresponding approximate share value.
3. Energy Sector Requirements
The energy sector is facing a sudden surge in the demand for resources to move forward. Manufacturers find the cost of manufacturing too higher because of the rise in the prices of energy products and the cost of many products went higher, especially in the food sector.
In Italy, the prices of gas and electricity surged by more than 50% during the 2021s winter season. Inflation in Italy rose by 3.9% during 2021 with a prediction of 2.8-3.2% for 2022. Italy is dependent on the imports of energy resources such as crude oil and natural gas. Below shown are the Italian imports for crude oil (2709) and natural gas (2711) with imports values for 2021.
4. Shortages of Goods
The major shortage of goods resulting from the lower manufacturing outputs for the product is pushing the prices of interdependent goods higher. The example of this is relevantly evident in the global shortage of semiconductor chips. This is driven by the sudden increase in the sales of household appliances and electronics during the pandemic.
The sudden surge pushed the manufacturers to bolster the production of the goods, but as aforementioned, the overwhelming demand from people around the world and the rise in fuels and oils pushed the prices higher. Shortage of goods and services in the USA, combined with supply chain issues and the rising cost of labour, have resulted in an increase in the inflation rate by 7.5% in the last year. This is the highest jump recorded in the US’s inflation rate in 40 years.
5. Commodity Prices Hike
Rising rates of inflation have increased the prices of products in commodities. Since the COVID-19 pandemic, the shortages of goods due to the lack of manufacturing units pushed the demand higher and so do the prices of commodities. Products such as plastic, concrete, steel, and timber prices surged, especially in countries such as the US and the UK in 2021.
Inflation has hit Pakistan more severely than any other country mentioned here. Pakistan’s inflation rate increased to 13% in January, propelling food prices by 17%. Petroleum oil prices skyrocketed to about 40% in January, for the first time in Pakistan. The petrol prices in Pakistan are 150 Pakistan Rupees ($0.86) per litre. Petroleum is the highest imported product in the overall imports of Pakistan. Below shown are Pakistan petroleum (2710) imports for 2021.
6. Climate Impacts
Natural disasters, weather events, and uncertain climatic patterns have also resulted in the rise of inflation in many countries. Oil supplies from the USA were affected due to Hurricane Ida, a semiconductor factory in Japan went through a sudden fire attack, a winter storm in Texas shut down many factories and Brazil’s poor harvesting & heavy drought increased coffee prices.
India faced a strong impact from the locusts’ swarms in 2020-2021, reaching several regions of India, something which hasn’t happened since 1961. A locust swarm of around 180 square kilometres in size entered India on 22nd May 2020. Locust swarms reached India’s Gujarat, resulting in crop damage to about 33% and more, including other regions such as Rajasthan and other parts of India. Below are the imports and exports of the agricultural products for 2020.
Inflation in many advanced economies and emerging markets & developing economies are rising with the worsening conditions of international trade and rising demand for numerous goods and services throughout the world. With serious wars between countries, such as the Russia-Ukraine oil trade war will cease to exist, it’s harder to say about any betterment. According to our trade data experts, rising imports and exports with lower quantities than the previous year shows the state of inflation getting worse, and further observations are required.