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Inflation: Seven reasons the cost of living is going up around the world | |
(1 day later) | |
From buying groceries to heating our homes, the cost of living is rising sharply - not just in the UK but around the world. | From buying groceries to heating our homes, the cost of living is rising sharply - not just in the UK but around the world. |
Global inflation - the rate at which prices rise - is at its highest since 2008. Here are some of the reasons why. | Global inflation - the rate at which prices rise - is at its highest since 2008. Here are some of the reasons why. |
1. Rising energy and petrol prices | 1. Rising energy and petrol prices |
Oil prices slumped at the start of the pandemic, but demand has rocketed back since, and have hit a seven-year high. | |
In the US gasoline currently costs an average of $3.31 a gallon - up from $2.39 a gallon a year ago. It's a similar story in the UK and the EU. | |
The price of gas has also shot up, leaving people around the world with eye-watering central heating bills. | The price of gas has also shot up, leaving people around the world with eye-watering central heating bills. |
Demand from Asia has driven up prices, along with a cold winter in Europe last year, which depleted gas reserves. | Demand from Asia has driven up prices, along with a cold winter in Europe last year, which depleted gas reserves. |
Petrol prices: Are we paying too much at the pump? | Petrol prices: Are we paying too much at the pump? |
2. Goods shortages | 2. Goods shortages |
Nike - and other companies - have raised prices due to supply chain costs | Nike - and other companies - have raised prices due to supply chain costs |
The price of many everyday consumer goods jumped during the pandemic. | The price of many everyday consumer goods jumped during the pandemic. |
Consumers stuck at home during lockdown last year splashed out on household goods and home improvements because they couldn't go to restaurants or on holiday. | Consumers stuck at home during lockdown last year splashed out on household goods and home improvements because they couldn't go to restaurants or on holiday. |
Manufacturers in places such as Asia - many of which faced shutdowns due to Covid restrictions - have struggled to keep up with demand since then. | Manufacturers in places such as Asia - many of which faced shutdowns due to Covid restrictions - have struggled to keep up with demand since then. |
It's led to shortages of materials such as plastic, concrete and steel, driving up prices. Timber cost as much as 80% more than usual in 2021 in the UK and reached more than twice its typical price in the US. | It's led to shortages of materials such as plastic, concrete and steel, driving up prices. Timber cost as much as 80% more than usual in 2021 in the UK and reached more than twice its typical price in the US. |
Major US retailers Nike and Costco have put up their prices because of higher supply chain costs. | Major US retailers Nike and Costco have put up their prices because of higher supply chain costs. |
And there's a shortage of microchips, which are vital components in cars, computers and other household goods. | And there's a shortage of microchips, which are vital components in cars, computers and other household goods. |
3. Shipping costs | 3. Shipping costs |
Global shipping companies - which move goods around the world - have been overwhelmed by surging demand after the pandemic. | Global shipping companies - which move goods around the world - have been overwhelmed by surging demand after the pandemic. |
It's meant retailers have had to pay a lot more to get those goods into stores. As a result, prices have been passed on to consumers. | It's meant retailers have had to pay a lot more to get those goods into stores. As a result, prices have been passed on to consumers. |
Sending a single 40ft container from Asia to Europe currently costs $17,000 (£12,480) - 10 times more than the year before, when it was $1,500 (£1,101). | |
It's been accompanied by a rise in air freight fees and made worse by a lorry driver shortage in Europe. | It's been accompanied by a rise in air freight fees and made worse by a lorry driver shortage in Europe. |
Transport bottlenecks appeared to be easing in December, with the US starting to get on top of record congestion at its ports. | Transport bottlenecks appeared to be easing in December, with the US starting to get on top of record congestion at its ports. |
But Omicron and the emergence of future Covid variants could reverse these gains. | But Omicron and the emergence of future Covid variants could reverse these gains. |
How Covid disrupted our Christmas toy deliveries | How Covid disrupted our Christmas toy deliveries |
4. Rising wages | 4. Rising wages |
Many people quit the workforce or changed jobs during the pandemic. | Many people quit the workforce or changed jobs during the pandemic. |
In the US, April saw more than four million people quit their jobs, according to the Department of Labor - the biggest spike on record. | In the US, April saw more than four million people quit their jobs, according to the Department of Labor - the biggest spike on record. |
As a result, firms are having problems recruiting staff such as drivers, food processors and restaurant waiters. | As a result, firms are having problems recruiting staff such as drivers, food processors and restaurant waiters. |
A survey of 50 major US retailers suggested 94% were having trouble filling empty roles. | |
As a result companies are having to put up wages or offer signing-on bonuses to attract and retain staff. McDonald's and Amazon are offering hiring bonuses ranging from $200 to $1,000. | As a result companies are having to put up wages or offer signing-on bonuses to attract and retain staff. McDonald's and Amazon are offering hiring bonuses ranging from $200 to $1,000. |
Those extra employer costs are again being passed on to consumers. Global clothing brand Next have blamed planned price rises for 2022 partly on climbing wage costs. | Those extra employer costs are again being passed on to consumers. Global clothing brand Next have blamed planned price rises for 2022 partly on climbing wage costs. |
Amazon are offering hiring bonuses in an attempt to attract workers | Amazon are offering hiring bonuses in an attempt to attract workers |
5. Climate impact | 5. Climate impact |
Extreme weather in many parts of the world has contributed to inflation. | Extreme weather in many parts of the world has contributed to inflation. |
Global oil supplies took a hit from hurricanes Ida and Nicholas passing through the Gulf of Mexico and damaging US oil infrastructure. | Global oil supplies took a hit from hurricanes Ida and Nicholas passing through the Gulf of Mexico and damaging US oil infrastructure. |
And problems meeting the demand for microchips were worsened after a fierce winter storm closed major factories in Texas last year. | And problems meeting the demand for microchips were worsened after a fierce winter storm closed major factories in Texas last year. |
The cost of coffee has also jumped after Brazil, the world's largest producer, had a poor harvest following its most severe drought in almost a century. | The cost of coffee has also jumped after Brazil, the world's largest producer, had a poor harvest following its most severe drought in almost a century. |
Cold weather in Texas caused major power problems | Cold weather in Texas caused major power problems |
6. Trade barriers | 6. Trade barriers |
More costly imports are also contributing to higher prices. New post-Brexit trading rules are estimated to have reduced imports from the EU to the UK by about a quarter in the first half of 2021. | More costly imports are also contributing to higher prices. New post-Brexit trading rules are estimated to have reduced imports from the EU to the UK by about a quarter in the first half of 2021. |
Roaming charges are returning for many UK travellers visiting Europe this year. | Roaming charges are returning for many UK travellers visiting Europe this year. |
Separately, US import tariffs on Chinese goods have almost entirely been passed on to US customers in the form of higher prices. | Separately, US import tariffs on Chinese goods have almost entirely been passed on to US customers 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 affecting US suppliers and global customers. | |
7. The end of pandemic support | 7. The end of pandemic support |
Governments worldwide are unwinding support given businesses to help with the impact of coronavirus. | Governments worldwide are unwinding support given businesses to help with the impact of coronavirus. |
Public spending and borrowing increased across the world during the pandemic. This led to tax rises that have contributed to the cost-of-living squeeze, while most people's wages remain unchanged. | Public spending and borrowing increased across the world during the pandemic. This led to tax rises that have contributed to the cost-of-living squeeze, while most people's wages remain unchanged. |
Many developed economies have had policies designed to protect workers - such as furlough - and welfare policies to protect the lowest paid. | Many developed economies have had policies designed to protect workers - such as furlough - and welfare policies to protect the lowest paid. |
Some economists suggest these policies could also push inflation higher as the support measures draw to a close. | Some economists suggest these policies could also push inflation higher as the support measures draw to a close. |
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