You have probably noticed that the cost of living has increased significantly wherever you are in recent times. And it is set to get much worse. There are multiple reasons for this, and we decided to examine the root causes. Here is why the cost of living is rising.
Why The Cost Of Living Is Rising – Energy & Petrol Prices
Oil prices fell sharply at the start of the pandemic, but demand has subsequently soared to a seven-year high.
In the United States, the average price of gasoline is $3.31 per gallon, up from $2.39 a year ago. In the UK and the EU, the situation is identical.
The price of gas has also increased, resulting in sky-high central heating expenditures for consumers all around the world.
Prices went up as a result of increased demand from Asia, as well as a harsh winter in Europe last year that depleted gas reserves.
Shortage Of Goods
During the pandemic, the cost of several common consumer goods increased.
Because they couldn’t go out to eat or go on vacation during the shutdown last year, consumers splurged on household items and home upgrades.
Since then, manufacturers in regions like Asia, many of which Covid limitations forced to close, have struggled to keep up with demand.
The result we have all witnessed is material shortages, such as plastic, concrete, and steel. This drives up prices. In 2021, timber in the United Kingdom cost up to 80% more than usual, and it cost more than twice as much in the United States.
Microchips, which are critical components in cars, computers, and other home items, are also in short supply.
Why The Cost Of Living Is Rising – Shipping Costs
Following the outbreak, global shipping businesses – which transport commodities throughout the world – have been swamped by increased demand.
Retailers have had to pay a lot more to get those goods into stores as a result of this. As a result, consumers are paying higher prices.
A single 40ft container from Asia to Europe now costs $17,000 (£12,480), which is ten times more than the previous year’s cost of $1,500 (£1,101).
It’s been accompanied by an increase in air freight prices, which has been exacerbated by a European lorry driver scarcity.
In December, transportation bottlenecks appeared to be lessening, with the United States beginning to address record port congestion.
However, Omicron and future Covid versions have the potential to reverse these advantages.
Wages On The Up
During the pandemic, many people left the labour or changed employment.
According to the US Department of Labor, more than four million Americans quit their jobs in April, the highest number on record. As a result, companies , food processors, and restaurant servers.
According to a survey of 50 large US retailers, 94% of them are having problems filling open positions.
As a result, businesses are being forced find it more difficult currently to recruit. Especially those recruiting drivers. The solution is they must raise wages or offer signing-on bonuses in order to attract and keep employees. McDonald’s and Amazon are both giving $200 to $1,000 in hiring bonuses.
Consumers once again bear the brunt of the increased employer costs. Part of the reason for expected price increases in 2022, according to global clothing manufacturer Next, is rising labour costs.
Why The Cost Of Living Is Rising – Climate Change
Aiding inflation is the extreme weather witnessed and experienced in many regions of the world. Hurricanes Ida and Nicholas wreaked havoc on global oil supplies by destroying US oil infrastructure in the Gulf of Mexico.
And challenges satisfying demand for microchips were exacerbated last year when a severe winter storm shut down major plants in Texas. Coffee prices have gone up as a result of Brazil, the world’s largest producer, declaring bankruptcy.
Trade Barriers
Imports that are more expensive are also contributing to increasing prices. In the first half of 2021, those in the know expect new post-Brexit trade restrictions to result in the lowering of imports from the EU to the UK by around a quarter.
For many UK visitors to Europe this year, they will experience once more roaming costs. Separately, Import duty costs are passed to consumers for Chinese goods in the form of increased pricing. Last year, Huawei, the Chinese telecoms giant, stated that US penalties imposed on the business in 2019 were harming US suppliers and global consumers.
