Many countries around the world are experiencing very high inflation. Some areas are even setting new records. There are many causes and many responses for this new economic reality.
While inflation is not necessarily bad news for everyone, most of us are having to adjust to this new reality by coming up with new savings strategies, consuming less, or finding news sources of income. Here is a summary of the main causes and responses to this global wave of inflation.
What is causing inflation around the world?
While the United Kingdom is experiencing particularly acute inflation, it is also a global phenomenon with global and local causes. For example, we certainly have to recognise the impact that the war in Ukraine is having on global food prices. As Europe’s break basket, there is now a major disruption in key crops. This is affecting the entire world.
However, we can also recognise that Boris Johnson could take action on rising food prices. The animal welfare group Compassion in World Farming is urging the government to use the crisis to move Brits towards a healthier and more sustainable diet that emphasises plants and animal welfare. Given the high prices of grains used to feed animals, this is a concrete action they could take.
Some other causes of inflation globally include the disruptions in the supply chain caused by the COVID-19 pandemic and related public health measures. With factories closing in China due to their zero COVID policy, the price of many consumer goods skyrocketed. The same thing can be said of major ports. Some of them were unable to operate at full capacity due to workers getting sick and new health measures to ensure public safety.
Many countries also began injecting cash into the economy to help keep working families afloat during the roughest times of the pandemic. Others were saving money as they were unable to go out and spend their money as they normally would., All of this has led to a built up demand for consumer goods. Between a higher demand and a lower supply, prices are bound to rise.
What are companies doing?
When we think of inflation, we think of rising prices. In fact, that is very nearly the definition. However, companies have ways of hiding these rising prices from the eyes of consumers, all the while dealing with the rising costs of the source materials.
Economists call the phenomenon of smaller packages with the same prices “shrinkflation.” You might not be paying more every time you go to the grocery store, but you will have to go back sooner to buy more. For example, Walkers cut two crisps from its bag of 24. While the price stays the same, savvy consumers will be able to notice this sleight of hand.
Some companies are taking advantage of the situation to make it seem like they are improving their products, such as marketing smaller bottles as having an easier grip.
What can families and consumers do?
Most families are having to tighten their belts a little bit these days. Whether it means putting off vacations or eating out at restaurants a little bit less, we are all adjusting. There are some creative ways to save money while also having fun. For those who like gambling, there is a real opportunity here.
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Other strategies consumers are employing to stay afloat include looking for cheap forms of entertainment. If going to the movies has become too expensive, then we can always read a book. If the prices at the restaurant on the corner have risen, we can still get out of the house by having a picnic.
These slower ways of living may even come with surprising benefits in terms of quality time with friends and family and a significant reduction in stress. Changes often bring pleasant surprises with them.