Creciente Inflación

Surging Inflation Continues to Stunt Global Growth

“Policy choices have become more difficult, with limited room to manoeuver,” warns the international body in its latest world economic outlook report

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Rising inflation has slowed global growth and many economies, both developed and developing, are preparing for a 2022 where the cost of living will continue to affect the financial statements of companies and the pockets of their citizens.

The International Monetary Fund (IMF), faced with rising inflation, supply chain bottlenecks and the emergence of the Delta variant of the coronavirus, cut its growth expectations for the global economy.

“Policy choices have become more difficult, with limited room to manoeuver,” warns the international body in its latest world economic outlook report.

The IMF expects the economy to grow by 6 %, “however, this modest headline revision masks large downgrades [of forecasts] for some countries.”

The multilateral body has told countries to prepare to take measures to contain inflationary risks, which are already being reflected in the price of energy, food and some services around the world.

Muchos consumidores comienzan a sentir las consecuencias de la escasez en sus bolsillos. (EFE)
Many consumers are beginning to feel the consequences of the shortages in their pockets. (EFE)

Developed economies were expected to grow by 5.6 %, but October forecasts indicate that this growth will not exceed 5.2 %. The reduction is mainly due to disruptions in supply chains.

For developing countries and emerging markets, the IMF expects more moderate growth, hovering around 5.9 %.

Supply crisis to blame for rising inflation worldwide

The supply crisis has hit the United States, China and the Eurozone particularly hard. From hundreds of containers waiting to be shipped at the port of Yantian, to warehouses with no space on the west coast of the United States, which are having problems dispatching products due to a lack of personnel.

“It’s crazy, when I was looking for suppliers in China to design a product, the cost of shipping a pallet to Los Angeles was around $800, two months later the cost had risen to $3,200, that is, transportation costs quadrupled,” says Rene Ordosgoitia, a Latino entrepreneur who owns an office products store on Amazon.

Many suppliers have had to increase their inventories to shield themselves from the costly seaborne trade that siphons off profits as more containers pile up at ports as they are shipped.

Los problemas en la cadena de suministros china han causado una creciente inflación en el resto del mundo. (EFE)
Problems in the Chinese supply chain have caused rising inflation in the rest of the world. (EFE)

“High shipping costs, produced by the current situation in the Asian country’s ports together with the duty tax imposed by the United States on imports from China forced us to look for new suppliers in other East Asian countries,” explains Ordosgoitia.

Added to the high shipping costs have been the repeated power outages in China, which have caused severe delays in manufacturing in the Asian giant. Companies such as Apple or Tesla have had to limit the number of units to be released to the market due to the continuous delays in Chinese manufacturing.

The consulting firm Gartner in its latest survey of more than 250 companies working in China, indicated that up to 30 % of respondents were making plans to exit China by 2023, which means that in the future China could gradually lose some foreign investment.

In Europe, energy prices (which are highly dependent on fossil fuels in winter) are escalating faster and some experts are warning of rationing by the end of the year, unless the fuel crisis can be solved soon.

The New York Federal Reserve predicted that inflation in the United States would not be transitory and Americans should get used to living with more inflation. With the largest economy adjusting to higher inflation, it is a sign that the whole world will have to get used to a wave of more volatile prices, which will come at the expense of the economic growth that was expected to be sustained after the pandemic.

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