Monday Market Musings >>> Global Inflation: Ouch that Stings
Picture Credit: Engin Akyurt
As 2022 kicks off, people are hopeful that this year will be the one of redemption for the global economy, as it marks the second year that the world has been disrupted by the Coronavirus pandemic, and hopefully it’s the last. However, things seem to be getting off to a rough start.
The Omicron variant is causing hundreds of thousands of new cases every day worldwide, US inflation is at a four year high, Germany’s economy shrank in the final months of 2021, prices are rising in Japan, and Europe is going through an energy crisis. Let’s take a closer look at each issue and what it means for the chances of a global economic recovery this year.
Omicron is the latest variant of the Coronavirus that has plagued the world. The Omicron variant is said to be less severe than the Delta variant, but it is more transmissible. The UK experienced a huge surge in cases last week as the variant tore through the nation and its weak Covid reduction policies. On the 5th of January they recorded more than 190,000 new cases.
On the brighter side however, the daily case count has come down drastically since then, but they are still recording up to 70,000 new cases per day (as of the 16th of January).
US inflation is also at a four year high. Consumer prices are set to gradually rise and further burden Americans with eye-wateringly large bills. Prices in America are expected to rise by an annual rate of 3.1% over the next ten years.
It’s not just consumer prices that are rising, housing prices are also on the rise. Mortgage rates in the US have soared for a third consecutive week, reaching the highest it has ever been in the past two years. It’s not just the US that is struggling with inflation either, inflation rates in Asian countries are also spiraling upwards. Japan’s inflation forecasts have jumped to the highest they have been in 13 years.
European Energy Crisis
Energy prices are soaring in Europe and it’s becoming unbearably more expensive. The global gas supply crunch has set the bills soaring as the current supply of natural gas is not enough to meet the demand. Russian Prime Minister Alexander Novak said that the EU have only themselves to blame and commented, “Incorrect planning, short-term energy policy is a headache for European politicians, which they are trying to pass on to others”.
Picture Credit: Mufid Majnun
Another German Recession?
Germany is on the path to yet another recession from the pandemic as the Omicron strain affects traveling and disrupts supply chains. It is reported that output in Germany fell between 0.5% and 1% in the final quarter of 2021, which has produced some shaky forecasts for the first and second quarters of 2022.
It is critical that Germany doesn’t plunge into another recession as a German economic bounce back could set the pace for the rest of Europe to follow suit as well.
However, even with these hinderances kicking off 2022, the World Bank is still confident that the global economy will witness an economic recovery and growth of about 4.1% this year.
January 17th 2021 | 5:20 PM