The United States is experiencing one of the biggest waves of price increases in the world. But we are not the only nation to feel the pain.
Concrete example: Thursday, the Bank of England raised interest rates to fight against soaring inflation. It is the first major central bank to do so.
When it comes to higher prices at the gas pump or the grocery store, “we’re not an island. We have a lot of company, ”said Drew DeSilver, senior editor at the Pew Research Center who researched global inflation during the pandemic.
He said the majority of the 46 countries he tracked experience it and a third have seen their rates increase by more than 2 percentage points.
There are common forces driving the rising costs: global oil prices, pandemic supply chain issues, and how the virus has altered consumption patterns.
The closures, for example, have caused people to spend on goods rather than services, according to Josh Bivens of the Economic Policy Institute.
“And that has really exacerbated the supply-demand mismatch in this industry with the grunts in the supply chain,” Bivens said.
The United States is third on the inflation list after Brazil and Turkey, but it has a unique political and economic climate.
Demand for goods is unusually high, said Adam Posen of the Peterson Institute for International Economics. “We tend to consume more and import more than most other economies, even rich ones,” he said.
And by “more” he means more. He said the United States accounts for a quarter of global spending on goods.
In addition, the United States had an unusual pandemic labor market. For example, when companies closed in 2020, many European countries heavily subsidized wages and people kept their jobs. Posen said the United States was paying unemployment insurance instead.
“So reopening the economy leads to more labor shortages, more rising wages and more disruption,” he said.
Supply chain problems are starting to ease, according to Bivens of the Economic Policy Institute. But there is one global commonality that could threaten improvement: COVID variants.
“And these aren’t things that, you know, monetary policy hits too well. It’s not too much, even fiscal policy can hit, ”Bivens said.
So here’s yet another story that ends with us telling you something you probably already know: The virus is still running the economy.