What is inflation: inflation 2022 all over the world, UN experts warn about inflation, inflation impact on poorest
What is inflation?
Inflation is an increase in the prices of goods and services. With inflation, the depreciation of money occurs, the purchasing power of the population decreases. The opposite of inflation is deflation which means the reduction in prices.
Inflation in Western countries has reached its highest levels in decades. This is largely due to military operations in Ukraine. RBC shows what is happening to consumer prices in leading economies.
Inflation impact all over the world 2022
New risks stemming from the Russian military operation in Ukraine and the sanctions imposed by the West in response have led to the fact that inflationary pressure on the global economy has increased dramatically. Problems with the supply of grain, fertilizers and energy products provoked a sharp rise in prices for them on the world market.
UN experts warn that the poorest will suffer the most from rising inflation. According to their calculations, a rise in the price of food by an average of 1% means that 10 million people around the world will be in poverty; the total number of those who will fall below the poverty line after the outbreak of hostilities in Ukraine, UN experts estimate at 95 million. The increase in inflation since March 2022 has already led to the fact that the number of poor people in the developing countries of the world have increased by about 71 million, calculated in UN.
Serious problems arose not only in the third world, but also in the richest states. For example, in the United States, food prices in June rose (compared to the beginning of last summer) by an average of 10.4%, and gasoline – by almost 60%. In general, consumer prices increased by 9.1%, which was the highest figure in more than 40 years – since November 1981 (9.6%), when the so-called Great Inflation was coming to an end in the United States. At its peak, in March-April 1980, the annual price increase accelerated to 14.8%. The absolute maximum, according to the US Bureau of Labor Statistics, inflation in the country reached shortly after the end of the First World War, namely in June 1920, 23.7% year on year.
40-plus-year high inflation was cited as one of the top threats in a Bank of America survey of 259 professional market participants managing $722 billion in assets. Expectations for global growth and corporate earnings fell to record lows, while recessions were the highest since the economic slowdown caused by the COVID-19 pandemic in May 2020.
In the European Union, which cannot boast of such a long history, inflation reached absolute maximums in 2022. In June, in the EU as a whole, it reached 9.6% per annum, and in the euro area – 8.6%. At the same time, in Lithuania and Estonia, the increase in consumer prices exceeded 20%, amounting to 20.5 and 22%, respectively.
In Germany, according to the Federal Statistical Office, consumer prices rose by 7.6% in June (by 8.2% according to the Eurostat methodology). In May, the increase in prices was slightly higher (7.9%). A slight decrease is explained by the introduction of preferential tickets for public transport from June 1 and a reduction in the fuel tax, without which, according to the statistical service, prices would have risen by 8.6%. The May figure is considered a record since the re-unification of Germany in 1990. The last time inflation in Germany rose to this level (7.9%) against the background of the oil embargo was in December 1973.
In other major European countries, inflation figures in June were as follows:
France – 5.8%, the maximum since the transition of France to the new index calculation system. The last time higher inflation was in July 1985 (6.1%);
Italy – 8%, maximum since January 1986 (then it was 8.2%);
Great Britain – 9.4%, the maximum since the start of statistics in 1997. According to Office for National Statistics calculations, inflation was last higher in February 1982 at 10.2%. The historical maximum according to the same calculations is August 1975, 24.5%.
Outside of Europe, rapid inflation growth was recorded in June 2022 in countries such as Argentina (64%, maximum since January 1992, when it was plus 76%) and Turkey (78.62%, maximum since September 1998, was 80.4%.
In South Korea, at the end of June 2022, inflation was 6%, which was the maximum since November 1998 (6.8%), in India – 7.01%, in Mexico – 7.99% (the maximum since December 2000, it was 8.11%), in Brazil – 11.89%, and in China – only 2.5% (the maximum since July 2020, it was 2.7%).
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