Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Price pinch: global economy caught in perfect storm

Stock MarketsOct 14, 2021 10:49AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
3/3 © Reuters. FILE PHOTO: A money changer sells U.S. dollar bills at a currency exchange office in Ankara, Turkey September 24, 2021. REUTERS/Cagla Gurdogan 2/3

By Guy Faulconbridge, Andrew MacAskill, Daniel Leussink and Leika Kihara

LONDON/TOKYO (Reuters) - From beef bowls in Tokyo to fried chicken in London, consumers are starting to feel the pinch from the surge in costs coursing through the global economy.

The rebound as coronavirus restrictions are eased has exposed supply chain shortages, with firms scrambling for workers, ships and even fuel to power factories, threatening the fledgling economic recovery.

Britain's biggest chicken producer said that the country's 20-year cheap food binge is ending and food price inflation could hit double digits.

"The days when you could feed a family of four with a 3 pound ($4) chicken are coming to an end," Ranjit Singh Boparan, owner of the 2 Sisters Group, said.

Shortages of warehouse workers, truckers and butchers as the world's fifth-largest economy deals with Brexit as well as COVID is exacerbating strains being felt globally by international business.

IKEA is leasing more ships, buying containers and re-routing goods as the world's largest furniture brand seeks to mitigate a "perfect storm" of disruptions.

Jon Abrahamsson, chief executive at Inter IKEA, told Reuters IKEA warns supply chain disruptions likely to last into 2022 he expects the crisis to extend into 2022, with the biggest challenge getting goods out of China, where around a quarter of IKEA products are made.

IKEA said stores in North America have been hardest hit by product shortages, followed by Europe.

In the United States, President Joe Biden on Wednesday urged the private sector to help ease blockages that are threatening to disrupt the U.S. holiday season.

Biden said the Port of Los Angeles would join the Port of Long Beach in working round-the-clock to unload about 500,000 containers, while Walmart (NYSE:WMT), Target (NYSE:TGT) and other big retailers would expand overnight operations to help out.

Even in Japan, where weak growth has meant that prices of many things - as well as wages - have not risen much in decades, consumers and businesses are facing a price shock for basics such as coffee and beef bowls.

Japan's core consumer inflation stopped falling in August, snapping a 12-month deflationary spell. Economists and policymakers expect to see recent price rises reflected in data over the coming months.

With central bankers on high alert and inflation in Spain, Ireland and Sweden hitting 13-year highs, European Central Bank President Christine Lagarde repeated that the upswing in Europe is seen as temporary and said there were no signs of it becoming embedded in wages.

"The impact of these factors should fade out ... in the course of next year, dampening annual inflation," Lagarde said.

Euro zone inflation is expected to hit 4% before the end of the year, twice the ECB's target, and a growing number of economists see it remaining above target throughout 2022.

COLD FRONT

Dwindling power supplies suggest a bleak winter outlook in some parts of the world.

As northern China chills, coal prices held near record highs, with power plants stocking up to ease an energy crunch that sent factory gate inflation in the world's second-largest economy to an at-least 25 year high in September.

Meanwhile, Coal India, the world's biggest coal miner, said it had temporarily stopped supplying non-power users as India battles one of its worst ever power supply deficits.

China's power crisis, caused by shortages of coal, high fuel prices and booming post-pandemic industrial demand has halted production, including at factories supplying big brands such as Apple (NASDAQ:AAPL).

Weak demand is capping consumer inflation, however, forcing policymakers to walk a tightrope between supporting the economy and further stoking producer prices.

There are few signs of any energy cost reprieve, with Brent crude oil futures above $84 a barrel on expectations that soaring natural gas prices will drive a switch to oil to meet winter heating needs.

The International Energy Agency said the crunch could boost oil demand by half a million barrels per day (bpd).

"Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery," the IEA said in its monthly oil report.

Top economic institutes cut their joint forecast for 2021 growth in Germany, Europe's largest economy, to 2.4% from 3.7% as supply bottlenecks hamper output.

German government and industry sources told Reuters on Thursday that the government plans to ease the pressure on consumers from rising energy bills by cutting the surcharge which helps fund renewable energy investment by 43% next year.

And in Singapore two energy providers, including one of the largest independents, are exiting the market while at least three others have stopped accepting new clients due to rocketing wholesale energy prices, company sources told Reuters.

Meanwhile, the White House has been speaking with U.S. oil and gas producers about helping to bring down fuel costs, two sources familiar with the matter said.

The average U.S. retail cost of a gallon of gasoline is at a seven-year high, and winter fuel costs are forecast to surge.

CHIPS DOWN

Dutch navigation and digital mapping company TomTom warned that supply chain problems in the auto sector could last well into 2022.

"Collectively we have underestimated how big the supply chain issues, and especially for semiconductor shortages, have been or have become", TomTom Chief Financial Officer Taco Titulaer told Reuters.

A global semiconductor chip shortage has forced carmakers still recovering from coronavirus to halt production again.

Italian-American vehicle maker CNH Industrial (NYSE:CNHI) said on Wednesday it will temporarily shut several European agricultural, commercial vehicle and powertrain manufacturing plants because of problems procuring components.

Soaring demand is, however, proving a boon for some.

Taiwan's TSMC, the world's largest contract chipmaker, reported a near 14% jump in third quarter profit.

TSMC and Taiwan have become central to efforts to resolve the global chip shortage, which has also hit manufacturers of smartphones, laptops and consumer appliances.

Some companies, such as Toyota Motor (NYSE:TM) Corp are intensifying efforts to restart production. The Japanese carmaker hopes to do so in December with a rebound in shipments from pandemic-hit suppliers, three sources told Reuters.

Price pinch: global economy caught in perfect storm
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
MK MK
MK MK Oct 14, 2021 6:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Print more! Inflation will go down then! Silly Powell knows that for sure
alex gallegos
alex gallegos Oct 14, 2021 6:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If all we have to do is print more money why go to the trouble of borrowing and increasing our national debt 🤔?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email