Inflation Isn’t Just A US Thing

Inflation Isn’t Just A US Thing

By Jen Kirbyjen.kirby@vox.com  Nov 24, 2021,

Supply chains are screwing with prices for a lot of the world.

In the United States, it’s the gas and Thanksgiving dinner and holiday toys. In the United Kingdom, it’s the energy costs and snacks and Uber fares. In Brazil, it’s the cost of food. In Germany, it’s fuel, rent, and electronics.

Consumers around the world are seeing higher prices for goods and services, and though some reasons for this vary by country, inflation is turning into something of a worldwide phenomenon.

In the US, the Consumer Price Index (CPI), which tracks what consumers pay for goods and services, rose by 6.2 percent in October compared to a year ago, the fastest increase since 1990. But other parts of the world are also seeing bumps: The eurozone (all countries using the euro) saw its inflation at about 4.1 percent, the highest in 13 years.

Covid-19, which has wreaked havoc on global supply chains, gets a lot of the blame for this. “Underneath it all, the key theme is a Covid disruption,” said Gregory Daco, chief US economist at Oxford Economics. “That’s the key reason why we’re seeing inflationary pressures around the world.”

It turns out, the global economy can go a little haywire when a once-in-a-generation pandemic rolls around. The virus scrambled supply chains, squeezed off international travel, and shut down businesses and services. Now, even as the world is recovering from these shocks, Covid-19 is still surging and resurging, and combined with other disruptions — like climate-related events — supply chains are still trying to sort themselves out.

“There are country-specific reasons and issues, but if there’s one overarching factor playing into this, it’s certainly what’s been happening in terms of global supply chain — which is a factor of the continued consequence of the pandemic,” said Matthew Sherwood, global economist at the Economist Intelligence Unit.

Covid chaos, then, takes the blame, but it’s not necessarily one-size-fits-all. Inflation dynamics are different, depending what country or region you’re looking at. It’s almost like post-Covid-economy bingo, where everyone’s playing the same game, but with different combinations on their boards. Sure, the Brits and the Americans are worried about gas prices and turkey shortages, but the price hikes on either side of the Atlantic might not necessarily be driven by the same issues at the same times.

Yet inflation is happening pretty much everywhere, said Gian Maria Milesi-Ferretti, a senior fellow at the Brookings Institution. It is being felt more acutely in some places more than others. This is true of developed economies, like the US or eurozone, which have seen big price increases for the first time in years. And Milesi-Ferretti said inflation is also happening in emerging markets, even those that already had higher inflation pre-pandemic, like economies in Latin America. Its impact on consumers may vary depending on where the price increases are happening, whether in commodities (things like oil or natural gas), or durable goods (like cars) or food.

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