[ad_1]
BUDAPEST, Hungary (AP) – From household appliances in the US to grocery stores in Hungary to gas stations in Poland, rising consumer prices due to high energy costs and supply chain disruptions are affecting households and businesses around the world.
Rising inflation is driving the price of food, gas and other products up, forcing many people to choose whether to dig deeper or tighten their belts. It is particularly bad in developing countries.
“We noticed that we were consuming less,” said Gabor Pardi, a buyer at an open-air food market in Hungary’s capital Budapest, after recently buying a sack of fresh vegetables. “We try to buy the cheapest and cheapest things, even if they don’t look that good.”
Almost two years on from the COVID-19 pandemic, the economic impact of the crisis is still being felt, even after countries emerged from debilitating lockdowns and consumer demand picked up again. To make matters worse, a new wave of infections is leading to renewed restrictions in Europe and other parts of the world.
The repercussions hit Central and Eastern Europe particularly hard, where countries have some of the highest inflation rates in the 27-nation EU and people are struggling to buy food or fill their fuel tanks.
A butcher in the Budapest grocery market, Ildiko Vardos Serfozo, said she saw a decline in business as customers go to multinational grocery chains that can offer discounts by buying large wholesale quantities.
“Buyers are price-conscious and therefore often leave us behind, even if our products are of high quality. Money talks, ”she said. “We are realizing that inflation is not good for us. … I’m just glad that my children don’t want to continue running this family business, I don’t see much future in it. “
In nearby Poland, Barbara Grotowska, a 71-year-old pensioner, told a discount store in the capital, Warsaw, that she was hit hardest by her garbage collection fee, which almost tripled to 88 zloty ($ 21). She also complained that the cooking oil she used rose by one-third the price to 10 zlotys ($ 2.40).
“That’s a real difference,” she said.
The recent surge in inflation has taken business leaders and economists around the world by surprise.
In the spring of 2020, the coronavirus shook the global economy: Governments ordered bans, shops closed or shortened opening hours and families stayed at home. Companies prepared for the worst, canceling orders and putting off investments.
To avert economic disaster, wealthy countries – led by the United States – introduced trillions of dollars in government aid, an economic mobilization on a scale not seen since World War II. The central banks also cut interest rates to revive economic activity.
But those efforts to boost the economy had unintended consequences: As consumers felt more encouraged to spend the money they received through government aid or soft loans, and the introduction of vaccines encouraged people to return to restaurants, bars, and shops That increased demand as the ability of suppliers to keep pace increased.
Ports and freight yards were suddenly clogged with shipments, and prices started to rise as global supply chains collapsed – especially as new outbreaks of COVID-19 sometimes shut down factories and ports in Asia.
The price increase was dramatic. Inflation in the United States rose to 6.2% in October, its highest level since 1990, and the International Monetary Fund predicts that global consumer prices will rise 4.3% this year, the largest increase since 2011.
It is most pronounced in the developing countries of Central and Eastern Europe, with the highest annual rates in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%). In Poland, one of the fastest growing economies in Europe, inflation reached 6.4% in October, the highest level in two decades.
Several shoppers at a vegetable stall in Warsaw said they were concerned about rising prices for staple foods such as bread and cooking oil and that the situation would worsen in the New Year when energy prices rise.
Piotr Molak, a 44-year-old vegetable seller, said he hasn’t had to raise prices on the potatoes, apples or carrots he sells, but the cherry tomatoes he imports from Spain and Italy and buys in euros have come a long way more expensive , as Poland’s currency, the zloty, has weakened.
“We will feel this especially in the new year, when the current increases,” said Molak. “We’ll really feel it when we have to spend more on our home than on pleasure.”
The weakening of the currencies in Central and Eastern Europe against the US dollar and the euro is driving up the prices of imports and fuel and exacerbating the crisis due to supply bottlenecks and other factors.
Hungary’s currency, the forint, has lost around 16% of its value against the dollar in the past six months and slipped to an all-time low against the euro last week. This is part of a strategy by the Hungarian central bank to keep the country competitive and attract foreign companies looking for cheap labor, said Zsolt Balassi, portfolio manager at Hold Asset Management in Budapest.
But the prices of imported goods have skyrocketed, and global oil prices in US dollars have propelled fuel costs to record levels.
“Since the Hungarian forint and actually all regional currencies are more or less constantly weaker, this will constantly increase the oil price in our currencies,” said Balassi.
In response to record fuel prices that peaked this month at 506 forints ($ 1.59) for gasoline and 512 forints ($ 1.61) for diesel per liter, the Hungarian government announced an upper limit of 480 forints ($ 1.50) ) at gas stations.
The upcoming elections in Hungary, where the right-wing ruling party faces the biggest challenge since it was elected in 2010, may be a little easier, but probably a factor, Balassi said.
“This is of course a political decision that has enormous economic disadvantages, but it is likely to make households happy,” he said.
The political nature of some economic decisions is not limited to Hungary.
Poland’s central bank, which is also facing a weakening currency, has been accused by critics of allowing inflation to rise too high for too long in order to stimulate economic growth and bolster support for the ruling party.
The bank surprised the markets with the timing and magnitude of two rate hikes in October and November to bring prices down, while the Hungarian central bank raised rates six times in smaller increments this year.
However, if central banks move too aggressively too soon to control inflation, it could shorten economic recovery, said Carmen Reinhart, chief economist at the World Bank.
She worries about higher food prices, which hit the poor most of all in developing countries, where a disproportionate share of family budgets are used to keep food on the table.
“Food prices are a barometer of social unrest,” said Reinhart, noting that the Arab Spring riots that began in 2010 were caused in part by higher food prices.
Anna Andrzejczak, 41 years old, works for an environmental foundation in Poland, was still a child when communism ended there in 1989 and only vaguely remembers the hyperinflation and other economic “tumults” that came with the transition to a market economy.
But she senses that prices will go up “every time I fill up,” with fuel costs increasing by about 35% over the past year.
“We have had a period of stability over the past few years, so this inflation is now a big shock,” said Andrzejczak. “We don’t have the price hikes we had back then, but I think it’s going to be a lot of stress.”
___
Wiseman reported from Washington and Gera from Warsaw, Poland.
[ad_2]
https://www.kxan.com/news/international/food-gas-prices-pinch-families-as-inflation-surges-globally/
