Compare US Inflation Rate – Forbes Advisor
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Although the latest US inflation report didn’t break any records like last month, it’s clear that high prices are here to stay. The consumer price index (CPI), which measures price changes and is a key indicator of inflation, showed that prices were 8.5% higher in July than 12 months ago.
Americans feel the pinch as soon as they wake up. Everything from food prices to gas prices have gone up.
But not only they suffer from the high prices. Inflation affects countries around the world, showing how connected we are – and how high prices have far-reaching implications.
Inflation rates by country
It is important to note that each country calculates its inflation rate slightly differently and regional circumstances can also affect the rate. For example, 10% inflation in the US is not necessarily the same as 10% inflation in Turkey.
The factors underlying inflation in any country or geographic region are complex. Government policies, fiscal and monetary interventions, changes in interest rates, and even extreme weather conditions can all contribute to inflation.
For example, energy and fuel costs were the main drivers of inflation in many countries. In the UK, supply chain problems due to a cold winter and lower-than-usual availability of wind energy have pushed up energy costs sharply, according to the UK Office of National Statistics.
While this overview of inflation rates isn’t strictly an apples-to-apples comparison, it can give us a broader perspective of what’s happening around the world.
US inflation of 8.5% in July was a slight improvement from June’s 9.1%, which was a 40-year high.
According to the latest CPI report, the price of eggs increased by 38% between July 2021 and July 2022. Fresh whole milk is up 14.5%. Grain price increased by 16.8%.
Meanwhile, the price of natural gas has risen by 30.5% and regular unleaded petrol by 44.6%.
UK inflation hit a new 40-year high of 10.1% between July 2021 and July 2022, according to the UK Office for National Statistics.
What about the average consumer? Egg prices rose 14.6% year-on-year. According to the Guardian, low-fat milk prices rose 34% and natural gas prices rose 95.7%.
Higher prices at Canadian gas stations are part of the reason consumer inflation hit 7.6% for the 12 months ended July. The previous CPI report showed inflation at 8.1%, the largest annual change since January 1983, partly caused by high gasoline prices.
For comparison, consumers paid 35.6% more for gasoline this July than in July 2021.
Year-on-year comparison for July showed China’s inflation rate rose to 2.7%, according to the National Bureau of Statistics of China. Compared to the previous year, food prices increased by 6.3% (with notable annual increases in the meat and fresh fruit categories) and fuel prices for vehicles increased by 24%.
As in many parts of the world, the prices of transportation, education and entertainment, as well as daily necessities, clothing, housing and health care have increased.
In Japan, the inflation rate was 2.6% in July, up from the June rate of 2.4%. This is the 11th consecutive month of rising consumer prices in Japan. Part of the reason for these increases is higher fuel and food costs following the Russian invasion of Ukraine and a falling yen.
Turkey’s inflation rate rose to 79.6% in July, a 24-year high. While there are many reasons for the rise in the country’s annual inflation rate, according to Al Jazeera, some include the war between Russia and Ukraine, rising commodity prices and a decline in the national currency since December.
High prices and a depreciated currency have hit consumers so hard that the nation has raised the minimum wage twice since early 2022.
According to the Australian Bureau of Statistics, the Australian consumer price index rose by 6.1% in June (the latest available data) compared to a year earlier. The increase was driven in part by rising prices for new homes, fuel and furniture.
Many countries in Africa are realizing high inflation rates. South Africa hit a 13-year inflation high in July, with an annual rise of 7.8%, mainly due to fuel and food prices.
Israel hit a 14-year high in July when its annual inflation hit 5.2%; a year ago annual inflation was 1.5%. According to the Israel Central Bureau of Statistics, the cost of fresh fruit, transportation, housing and entertainment were the main contributors to the increase.
What drives global inflation?
Market analysts and strategists cite several factors behind global price increases.
Kristina Hooper, chief global market strategist at Invesco, points to two textbook examples of why inflation is currently high: demand-pull inflation and cost-push inflation.
Demand-pull inflation occurs when prices rise due to increased demand, she explains. Demand inflation can be driven by increased government spending (e.g. providing stimulus checks).
If consumers expect higher prices in the future, they’re more likely to buy today — and that’s becoming a self-fulfilling prophecy when it comes to inflation expectations, according to Hooper.
The other type of inflation we see, cost-push inflation, causes prices to rise when the supply of goods and services is disrupted. High oil and natural gas prices are good examples here.
The global pandemic has a lot to do with rising inflation, Hooper explains. “We switched off [the] Economy, and then we turned it back on,” she says.
As economies began to grow again, many countries faced similar labor sourcing challenges and supply chain disruptions. “That contributed to the tightening of supply as demand increased,” notes Hooper.
Patrick J. O’Hare, chief market analyst at Briefing.com, agrees that the global pandemic has been a major contributor to our inflation woes. When the economy picked up again, American consumers, armed with stimulus funds, were ready to start spending again. The labor market had to ramp up to accommodate this new demand, except that many people were still concerned about Covid-19 and unwilling to return to work.
This concern was not limited to workers in the United States. “With offshore production wells kind of tied up by a lack of available labor, the supply chain growl really exploded,” says O’Hare.
Eventually, labor supply and supply chain problems started to resolve themselves — but then Russia invaded Ukraine, creating a host of new supply problems. “If we look at cost-driving inflation, one of the main drivers is higher commodity prices,” adds Hooper, and that’s what happened in the spring.
“And it wasn’t just energy. It’s also agriculture.” She reminds us that Ukraine has always been considered the “granary of Europe” because of its rich agricultural offerings.
Global inflation will continue until 2023
Living through a pandemic in a global economy that relies on each other for everything from fuel to food means we’re all in this together.
But while the entire world struggles with inflation, Hooper is quick to realize that every economy is unique, as is the nature of each economy’s inflation. It really depends on the specific factors in that particular economy.
For example, inflation in the United States is both demand-driven and supply-driven. Some of the energy and food price increases have been demand-driven, and that’s easier for central banks to control: “If you raise interest rates enough, you can hit the economy over the head with a sledgehammer and cool demand,” says Hooper.
European countries, including the UK, Germany, Spain and Italy, are affected by the Russian invasion of Ukraine, according to O’Hare, as these countries are oil importers.
“There’s only so much energy use that’s random,” Hooper explains. “When it’s cold in winter you need to heat your house and so there’s nothing the European Central Bank can do to raise interest rates to alleviate energy inflation.”
Some Asian countries also depend on Russia for commodities, which is fueling inflation due to the war between Russia and Ukraine. Turkey, for example, is dependent on oil and natural gas from Russia. Meanwhile, China is striving for energy independence, contributing to an inflation rate that has been slower than increases in other countries.
What is happening across borders or oceans is no different than what we are seeing in the United States with high gas prices. “People have to make decisions about what to spend their money on,” says O’Hare. “And if energy bills take away a larger chunk of your disposable income, you may have to cut back on your voluntary purchases, ultimately slowing your country’s economic growth.”
In the US, inflation did not come into being overnight and will not end overnight. “Miracles don’t come,” says Hooper. “Inflation will take some time to reach the Fed’s target.”
Hooper also reminds us that some things are beyond the Federal Reserve’s control. “The Fed can only control demand,” she notes. “It cannot control Russia’s invasion of Ukraine; it cannot control supply chains in China.”
While it will take time, we are beginning to see the pressure in the supply chain easing and the Covid situation has improved. Still, according to Hooper, we may not see a reprieve in inflationary pressures well into next year and perhaps even towards the end of 2023.
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