globalEDGE Blog - By Tag: inflation

The United States Federal Reserve’s recent move to lower interest rates signals a significant change in the current state of the world economy. This change is expected to impact global and US economies following years of rate increases intended to contain inflation. Lower interest rates in the US are anticipated to encourage business funding and consumer spending, supporting industries under strain. For example, if mortgages become cheaper, potential purchasers previously discouraged by high borrowing costs may become more active in the property market.

Retirement savings are a looming concern that millions of people across the world are facing daily. Amid economic turbulence, shifting demographics, and an evolving employment landscape, a growing number of people find themselves falling short when it comes to preparing for their golden years. For many, the biggest question about retirement is not how they will spend their free time, but rather if they’ll be able to retire.

Corporate profiteering, the relentless pursuit of excessive profits without ethical considerations, has become a significant factor in the realm of international business. In the interconnected global economy, the actions of companies in one country can have far-reaching consequences, particularly in terms of inflation. Corporate profiteering affects inflation and has created a global ripple effect.

Whether someone is buying or renting a house, there is a significant advantage if a home buyer pays in U.S. dollars. The dollar has surged against the British pound and euro in recent years. This led Americans to flock to countries like France and the United Kingdom to buy homes at a discount. The euro has since regained some of its strength, but those buying with the U.S. dollar can still see big savings in countries like Canada.

In June 2016, Britain voted to end its 40-year membership in the European Union. On January 31, 2020, the controversial decision to leave the union went into effect. Since that decision, Britain has had conflicting economic results with higher inflation and lower GDP.

Raising children has always been expensive, no matter where you live. Nevertheless, in recent times, millions of people struggle to put money away as they approach one of life’s key financial milestones. The high pace of inflation is to blame, increasing the expenses by almost 20% and leading to a current decline in birth rates.

Europe’s three largest economies by nominal GDP are Germany, the United Kingdom, and France. As the entire continent struggles through a period of economic turmoil that began in late 2022, how are its top three economies faring?

Shrinkflation has infiltrated our shopping experiences in more ways than one. From supermarket aisles to the realm of services, it’s a phenomenon leaving consumers both puzzled and frustrated. A variety of companies worldwide are using this cost-saving technique. Companies are reducing the size or quantity of a product while keeping its price the same or even increasing it. In other words, less products cost more.

The debate over raising the minimum wage is a contentious one, with proponents arguing that it will lift workers out of poverty and stimulate economic growth, while opponents argue that it will lead to job loss and higher prices for goods and services. As we look ahead to 2023, it is worth considering how an increase in the minimum wage might affect the labor market.

The Eurozone is seeing a drop in inflation – this comes as a first in 17 months since the war in Ukraine set off record-high energy and food prices. Inflation has been increasing in months prior, even when the U.S. rate was stable for four months after July. With this increase in inflation throughout the bloc, the European Central Bank (ECB) increased its key interest rate "more sharply than at any time in its history." 

This year's high inflation rates are going to cause some problems for suppliers and consumers this holiday season. Unlike in past years, suppliers are facing the issue of having too much supply and not enough buyers. Because of the outrageous prices being applied to housing and gas, consumers are being forced to put their money into more essential needs instead of holiday shopping.

With society on the edge of its seat in anticipation of a continued recession, the U.S. is going against expectations and is appearing to turn around the economy. The U.S. economy grew by 2.6% in the third quarter of this year after declining by 6% in the first quarter and 1.6% in the second quarter, which by definition takes the economy out of a recession. This is introducing reduced fears of a future recession; however, it does not prove that the economy has fully recovered.

Reflecting on the past couple of months, many headlines have emphasized the hyperinflation businesses and individuals are feeling around the world; however, many analysts have questioned if these price hikes are inflation or "greedflation". Headlines across Canada specifically are calling out grocery store chains for skewing the prices of their goods. With rising inflation, the majority of companies are steadily losing profit with the exception of grocery stores in Canada that are reporting high profits.

Inflation indicates how the costs of a particular set of goods or services have increased over time, most frequently in terms of a year regardless of the environment. The United States is very familiar with the concept of inflation, as seen by the Federal Reserve addressing what is known to be "the sharpest price surge in 40 years." This inflation is broad with no single condition to blame, as the global recession is forcing higher rates and an increasing debt market. 

As we reflect on the pandemic, conflict between Russia and Ukraine, and fluctuating economic conditions that all continue to impact communities across the globe, countries are seeing the long-lasting effects of these situations as inflation rates hit record highs. The United States, Spain, and France are only a few fighting inflation rates as the cost of living burdens citizens never like before.

Over the last few decades, inflation has been steady and rampant incline. Inflation is the rate of increase in prices over a given period. The current cost of living for a single person in the United States is $38,266 per year. Yet, in 2002, the cost of living was around $27,924 per year. This is a notable jump over the last 20 years. To add to this, the cost to attend college has increased by 169% spanning from 1980 to 2019. One of the steady indicators of economic conditions has been the automotive industry. Specifically, in the piece, the status of the used car industry will be highlighted.

During the past two years, the airline industry has seen a drastic fall in revenue and air traffic due to the Covid-19 pandemic. Many hoped 2022 would bring a rise of good fortune as it predicted the spread of the virus would slow down and will lift specific covid-19 regulations. However, 2022 has brought the opposite of good luck, causing the airline industry to meltdown.

With inflation among the highest in the world, Turkey is on the brink of an economic crisis concerning the dispute between Russia and Ukraine. Key economic contributors such as natural gas, oil, and tourists from Russia and Ukraine are relied upon by Turkey. The possible Russian invasion of Ukraine poses a major threat to Turkey’s already fragile economy.

Following a post-pandemic period of expansionary monetary policy, stimulus checks, and economic growth, the U.S. economy has been confronted with a new stage of high inflation. The annual rate of inflation in the U.S. hit 6.2% last month, its highest rate in more than three decades. While this has been a recent concern, it’s important to note that 85% of countries in the world are experiencing higher inflation rates than usual. Perhaps most negatively affected by high inflation is Turkey; its inflation rate has reached roughly 20%, the second-highest in the world behind Argentina (52%).

Global inflation is on the rise in 2021. Though inflation has experienced common fluctuations throughout modern history, this occurrence is particularly interesting because it cannot be traced to any typical cause of inflation: today’s increasing prices aren’t caused by a significant rise in consumer demand, they aren’t caused by wage increases, and they aren’t even caused by external cost spikes. Instead, the root of late 2021’s inflation is almost entirely logistical, and it presents itself in the form of supply chain bottlenecks, costly backups that are applying immense upward pressure on prices. Carrying some of the blame for these backups, and in the middle of a desperate scramble for workers, is the trucking industry.

The price of copper recently rose over $9000 per metric ton for the first time since 2011, and other commodities like oil, corn, and other metals like iron ore and nickel are seeing an increase in values as the economy shows potential signs of growth.  On top of the hope for economic growth, the possibility of rising inflation and a new focus on expanding the infrastructure of the renewable energy and electric vehicle markets has sent the price upward.

In a recently published report by the Economist Intelligence Unit, Singapore was named the most expensive city in the world for the 6th consecutive year. It was joined by Paris and Hong Kong for a three-way tie for the number one spot.

Last week the globalEDGE blog looked at how U.S. monetary policy, specifically with respect to inflation rates, was impacting debt markets in emerging economies. Today’s blog post continues the discussion about the implications of the U.S. Federal Reserve’s inflation policies and also provides a survey of currency inflation rates across the world.

In simple terms, inflation rates measure what has happened to consumer prices over the latest 12-month period. But what increases inflation? Well, economic growth is generally followed by a stronger and growing labor market, which means that unemployment is down and wages are increasing. This increases consumer’s disposable income and increases the cost of wages for companies. Both of those factors push prices up for consumers, which in turn, increases inflation rates. This is where interest rates, inflation’s best friend, comes into play. Shortly after inflation increases, interest rates begin to increase to control inflation (generally to 2%). Governments increase interest rates to incentivize people to save a larger chunk of their disposable income and decrease discretionary spending, in turn, decreasing consumer prices.

Three weeks ago, Robert Mugabe, who at age 93 had served as Zimbabwe’s head of state for 37 years, purged his vice president, and longtime loyal supporter, Emmerson Mnangagwa in a move which elevated Mr. Mugabe’s 52-year-old wife to next in the line of succession. This move sparked outrage within the country and ultimately cumulated in a de facto military coup that forced the resignation of Robert Mugabe. The three tumultuous weeks came to a close last Friday with the swearing in of the former vice president, Emmerson Mnangagwa as the nation’s new president. While civil order appears to have been restored, the question still remains as to what the future holds for Zimbabwe’s economy.

Inflation plays a major role in every economy in the world and measuring it is a very difficult issue for government statisticians. A variety of indices to measure inflation exist and each country picks the indices that are deemed relevant and measure it according to their own economy. Therefore, even if two countries use the same index, the basket of goods used to measure the index will include different items that are constantly revised and updated.

Consumer prices surged this September in the United Kingdom, rising at the fastest annual pace in two years. A seasonal rise in clothing prices, increasing hotel stay prices, and a spike in gas prices are all contributing factors to this inflation. According to the Office for National Statistics, the Consumer Price Index has risen by 1.0% as of September in 2016, the highest increase since November 2014.

On May 26, the price of the bitcoin began to surge, hitting a value of $467.50. Throughout the weekend, the currency continued its dramatic trajectory, spiking at $570 before settling around $530. This amounts to a sudden increase of 21% in the midst of a consistent, if low, period for the currency. While these values are far below bitcoin's one-time peak of $1,151, they are the highest prices the digital currency has reached since 2014. That same year marked a heavy blow for the bitcoin, bottoming it out at low rates that remained in force over the past year. Now, investors are indicating promise in the currency once again: Over the weekend, daily global transactions equated to $134,056,000, with over 15 million bitcoins in supply.

For a while now, Europe has been going through a wide variety of issues. Whether it’s the refugee crisis, risk of Britain voting to leave the European Union, or Greece’s economic disaster, Europe has been set back recently. Despite these issues, European leaders cannot afford to lose sight of their long-term economic goal, “Growth.” Europeans need to act now due to the continent's aging population that creates a significant barrier for economic growth. Statistics show that by 2050, the EU labor force could shrink by 42 million, or 12%, making growth almost impossible to achieve. 

Brazil’s economy shrank 1.7% between July and September, marking the third straight period of economic contraction. As Brazil’s economy has slipped further into recession, it has led to the downfall of its surrounding nations’ economies. Being the largest economy in Latin America, the slowdown could be detrimental to its neighboring nations’ economic growth.

As of late, there has been a lot of talk of whether the United States Federal Reserve Bank will raise interest rates in September. Typically, the Federal Reserve would raise its benchmark interest rate when the economy is growing too fast to encourage people to spend less and save more. This slows the economy down, thereby reducing inflationary pressure. A raise in interest rates signals a perception that inflation is rising and that the economy is healthy and growing.

Imagine a scenario where a market is losing value (deflation), which in turn scares away investors and greatly reduces cash flow in the active market. This stems growth, as more people lose confidence in a downward spiraling market. This is a scenario that the European Central Bank (ECB) would like to avoid, as the Eurozone is currently experiencing -0.1% deflation. Perhaps the ECB’s most important response has been through quantitative easing, which has had a substantial impact on the Eurozone's economy.

In February, the inflation rate in the United Kingdom fell to 0%. This is the lowest rate since records of inflation were first taken in 1960. Official figures demonstrate that lower prices of transportation, food, and computer goods helped to cut the rate back from January’s inflation rate of 0.3%. Although these figures are good indicators in some ways, they can also impact the interest rates set by the Monetary Policy Committee, which is considering raising the rates from their record low of 0.5%.

It's no secret that the Eurozone is an economically struggling region of the world, and although it has been recovering from the blow caused by its economic crisis, it has been doing so very feebly. Now, the recovery has suddenly stopped; in the second quarter of the year, the Eurozone was recorded as growing 0%. While economists say that the overall Eurozone economy should not sink into a recession yet again, it does not seem like the recovery will pick up its pace anytime soon. The future of its countries economies all depends on what actions the European Central Bank takes.

International economists are all asking the same question: Is the Eurozone's financial crisis over? For a region of the world that has borne some of the worst repercussions of the Great Recession, it could potentially be said now that the biggest brunt of the crisis is over, and the countries of the Eurozone are now on their (uneasy) way to recovery. However, this is not a confident prediction. Several factors, such as worryingly low inflation and high unemployment, are still present in these economies, showing that more problems may still be nigh. At this point it may be dangerous to assume the Eurozone has seen the last of its economic woes. Here is a closer look.

Japanese consumers rushed to local retailers on March 31 to purchase large numbers of goods. Even online retailers, such as “Aksul”, had their systems overloaded by the high volumes of transactions of basic goods such as toilet paper and instant rice. Why were the Japanese people in such a hurry to purchase these products? This is due to the sales tax hike from 5 to 8 percent, which was implemented the day after, April 1.

Many emerging markets have noted the rapid devaluation of their currencies taking place over the past year. In Colombia, the peso is now worth 2,017.01 per U.S. dollar, the weakest currency level since 2009. While other emerging markets such as South Africa and Turkey are fighting incessantly to combat currency declines by raising interest rates, Colombia is taking a different approach by fully embracing the decline of its currency.

Recent financial figures have shown that several countries around the globe have experienced some of their lowest inflation rates in years. Normally this would be the goal of the nations' central banks, but in the economic states of these regions, this low inflation could be the source of several problems. Now the issue facing many of the world's richest nations is to avoid extremely low inflation and to try and raise prices. The proposed processes to achieve these goals have the potential to lead to some intense competition.

Venezuela experienced an extreme 12-month inflation rate of 54% last month and shortages of basic goods. Venezuelan President Nicolas Madura has responded to extreme inflation by forcing managers of local businesses to lower their prices with arrests and armed forces. The socialist leader stated that the seizure of these stores was just the tip of the iceberg and that he will take over more businesses. These events could have a major effect on Venezuela’s economy, including an outflow of foreign investment and firms.

Starting in 2008, the financial crisis affected most of the countries in the world. Recently, a light of global economic recovery was shed on many of these countries. However, a new challenge aroused in the Asian currency price market. In India, people hope that the government can change a record-low currency trading situation, accelerating inflation. Furthermore, they hope India’s economy can find its way back to the normal path.

England, the third largest economy entity in the euro zone, is facing difficulties on its way to economic recovery and is seeking help from a Canadian governor. Taking the term from Sir Mervyn King, Mark Carney became the new governor of the Bank of England (BE) with hopes of bringing a breath of fresh air to the British economy. Before entering Carney’s time in charge, let’s take a glance at the British economy and predict the future trends under Carney’s lead.

India, the world’s tenth largest economy according to the International Monetary Fund, is seeing troubling signs in the short-term outlook. Recently, India has seen a slowing growth rate in GDP, increase in inflation to 9.1%, and a decrease in local investment. Many economists attribute these worrisome signs to the corruption and scandals plaguing the growing nation.  In recent months, the central government has been struggling to get the economy back on track.

It’s no secret that in these hard economic times companies worldwide have had to streamline processes and cut back on costs. These cut backs are starting to directly affect the value consumers are getting for their money. Now, due to rising global food prices, food and beverage companies are struggling more than most and having to cut back even more. Chips are mysteriously missing from bags, canned vegetables contain fewer ounces than before, and packaged goods of all types are seeing box size reductions. Even things like diapers are seeing shrinking package sizes. This is certainly not good news for consumers.

During the past year the future of the euro-zone was quite uncertain with raising debt, countries not being able to pay it off, and with many Germans feeling it was not fair for everyone to look towards the strong nation for financial help. The severe weather worsened the situation by slowing down activity and resulting in a low 0.3% growth during last quarter of 2010.

There has been much hype recently about rising inflation rates around the globe. The euro zone had an inflation rate of 2.2% in 2010, while China's rose 5.1% from November 2009 to November 2010. Many people fear that a surge in inflation could have an adverse effect on the recovery efforts of many economies. But what exactly is inflation and how does it affect an economy?

Imagine you take a bag of flour from a store shelf. In the time it takes you to make your way through the check-out line, the cost of that flour may have increased 15%. This was the situation in Zimbabwe a few years ago, but unfortunately things have only gotten worse.