Food and gas prices fluctuate families as inflation rises globally

Food and gas prices fluctuate families as inflation rises globally

Budapest From hardware stores in the US to food markets in Hungary and gas stations in Poland, rising consumer prices due to rising energy costs and supply chain disruptions are putting pressure on homes and businesses around the world.

Rising inflation leads to increases in the prices of food, gas and other products and causes many people to choose between digging deeper in their pockets or tightening their belts. In developing economies, it is particularly dire.

“We’ve noticed that we’re consuming less,” said Gabor Bardi, a shopper at an outdoor food market in the Hungarian capital, Budapest, after recently buying a bag of fresh vegetables. “We try to shop for things that are cheaper and more economical, even if they don’t look good.”

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Nearly two years after the outbreak of the COVID-19 pandemic, the economic impact of the crisis is still being felt even after countries emerged from debilitating lockdowns and consumer demand rebounded. To make matters worse, a new wave of infections is leading to renewed restrictions in Europe and other parts of the world.

The echoes of Central and Eastern Europe are particularly hard, as countries have some of the highest inflation rates in the 27-nation European Union, and people struggle to buy food or fill their fuel tanks.

A butcher at Budapest’s food market, Ildiko Vardos Cervoso, said it has seen a drop in business as customers turn to multinational grocery chains that can offer discounts by buying in bulk in bulk.

“Buyers are price sensitive and therefore often leave us behind, even if our products are of high quality. Money speaks,” she said. We noticed that inflation is not on our side. … I am just glad that my kids don’t want to continue in this family business, and I don’t see much of The future is in it.”

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In neighboring Poland, outside a discount supermarket in the capital Warsaw, 71-year-old retired Barbara Grotowska said she was hit hard by a garbage collection fee that nearly tripled to 88 zlotys ($21). She also lamented that the cooking oil she used had gone up by a third of its price, to 10 zlotys ($2.40).

“That’s a real difference,” she said.

The recent rise in inflation has surprised business leaders and economists around the world.

In the spring of 2020, the global economy was crushed by the coronavirus: governments ordered businesses to close or hours were cut short, and families stayed home. Companies braced for the worst, canceling orders and deferring investments.

In an effort to stave off economic catastrophe, rich nations – particularly the United States – have provided trillions of dollars in government aid, economic mobilization on a scale not seen since World War II. Central banks have also cut interest rates in an attempt to revive economic activity.

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But those efforts to stimulate economies had unintended consequences: consumers felt more emboldened to spend money they received through government assistance or low-interest borrowing, and the release of vaccines encouraged people to return to restaurants, bars and stores, leading to an increase in testing demand for Suppliers’ ability to keep up.

Ports and freight yards suddenly filled with shipments, and prices began to rise as global supply chains came to a halt — especially with the outbreak of the novel coronavirus, COVID-19, which has sometimes closed factories and ports in Asia.

The price hike was dramatic. Inflation in the United States jumped to 6.2% in October, the highest level since 1990, and the International Monetary Fund expects global consumer prices to rise 4.3% this year, the largest jump since 2011.

They are most pronounced in the developing economies of Central and Eastern Europe, with the highest annual rates recorded in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%). In Poland, one of the fastest growing economies in Europe, inflation was 6.4% in October, the highest in two decades.

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Several shoppers at a vegetable stall in Warsaw said they were concerned about the rising prices of staples such as bread and cooking oil and expected the situation to get worse in the new year, when energy prices were set to soar.

Piotr Mollack, a 44-year-old vegetable seller, said he has not yet had to raise the prices of the potatoes, apples or carrots he sells, but the cherry tomatoes he imports from Spain and Italy, which he buys with euros, have come a long way more expensive as the Polish currency has weakened, Zloty.

“We will feel that mostly in the new year when the electricity goes up,” Mollack said. “We’ll really feel it when we have to spend more on our home than we do on fun.”

Weakness in currencies across Central and Eastern Europe against the US dollar and the euro has pushed up import and fuel prices and exacerbated the distress caused by supply subsidies and other factors.

The Hungarian currency, the forint, has lost about 16% of its value against the dollar in the past six months and fell to a historic low against the euro last week. This is part of the Hungarian central bank’s strategy to keep the country competitive and attract foreign companies looking for cheap labour, said Zsolt Balassi, portfolio manager at Hold Asset Management in Budapest.

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But the prices of imported goods have skyrocketed, and global oil prices, set in US dollars, have pushed fuel costs to record levels.

“Since the Hungarian forint, and indeed all regional currencies, are weakening more or less continuously, this will continually drive up oil prices in our currencies,” Blasey said.

In response to record fuel prices, which peaked this month at 506 forints ($1.59) for gasoline and 512 forints ($1.61) per liter, the Hungarian government announced a cap of 480 forints ($1.50) at filling stations.

Blasey said the upcoming Hungarian election, in which the ruling right-wing party faces its most serious challenge since its election in 2010, was likely one factor, although it offered some relief.

“Obviously this is a political decision with enormous economic disadvantages, but it probably makes families happy,” he said.

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The political nature of some economic decisions is not limited to Hungary.

Critics accuse Poland’s central bank, which is also facing a weak currency, of letting inflation rise too high for too long to encourage economic growth and bolster support for the ruling party.

The bank surprised markets with the timing and size of two key rate hikes in October and November in an effort to ease rates, while Hungary’s central bank has raised interest rates in six smaller increases this year.

However, if central banks move aggressively too soon to control inflation, it could hamper the economic recovery, said Carmen Reinhart, chief economist at the World Bank.

She worries about rising food prices that primarily harm the poor in developing countries, where a disproportionate share of household budgets go toward keeping food on the table.

“Food prices are a barometer of social unrest,” Reinhart said, noting that the Arab Spring uprisings that began in 2010 were caused in part by rising food prices.

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Anna Andrzejczak, 41, who works at an environmental foundation in Poland, was still a child when communism ended there in 1989 and has only a vague memory of hyperinflation and other economic “upheavals” that came with the transition to a market economy.

But she feels prices are going up “every time I fill up my tank,” as fuel costs have gone up about 35% in the past year.

“We’ve had a period of stability in the past years, so now this inflation is a big shock. We don’t have the price increases that we had at the time, but I think that’s going to cause a lot of pressure,” Andrzejczak said.

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Wiseman reports from Washington, and Gera from Warsaw, Poland.

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