Price rises, shortages now global issues
LONDON/TOKYO: From beef bowls in Tokyo to fried chicken in London, consumers are starting to feel the pinch from the surge in costs coursing through the global economy.
The rebound as coronavirus restrictions are eased has exposed supply chain shortages, with firms scrambling for workers, ships and even fuel to power factories, threatening the fledgling economic recovery.
Britain’s biggest chicken producer said that the country’s 20year cheap food binge is ending and food price inflation could hit double digits.
‘‘The days when you could feed a family of four with a £3 chicken are coming to an end,’’ 2 Sisters Group owner Ranjit Singh Boparan said.
Shortages of warehouse workers, truckers and butchers as the world’s fifthlargest economy deals with Brexit as well as Covid19 is exacerbating strains being felt globally by international business.
Ikea is leasing more ships, buying containers and rerouting goods as the world’s largest furniture brand seeks to mitigate a ‘‘perfect storm’’ of disruptions.
Inter Ikea chief executive Jon Abrahamsson said he expected supply chain disruptions to extend into 2022, with the biggest challenge getting goods out of China, where about a quarter of Ikea products were made.
Ikea said stores in North America had been hardest hit by product shortages, followed by Europe.
In the United States, President Joe Biden this week urged the private sector to help ease blockages threatening to disrupt the US holiday season.
Biden said the Port of Los Angeles would join the Port of Long Beach in working round the clock to unload about 500,000 containers, while Walmart, Target and other big retailers would expand overnight operations to help.
Even in Japan, where weak growth has meant that prices of many things — as well as wages — have not risen much in decades, consumers and businesses are facing a price shock for basics such as coffee and beef bowls.
Japan’s core consumer inflation stopped falling in August, snapping a 12month deflationary spell. Economists and policymakers expect to see recent price rises reflected in data over the coming months.
With central bankers on high alert and inflation in Spain, Ireland and Sweden hitting 13year highs, European Central Bank President Christine Lagarde repeated that the upswing in Europe was seen as temporary and there were no signs of it becoming embedded in wages.
‘‘The impact of these factors should fade out . . . in the course of next year, dampening annual inflation,’’ Lagarde said.
Euro zone inflation is expected to hit 4% before the end of the year, twice the ECB’s target, and a growing number of economists see it remaining above target throughout 2022.
Cold front
Dwindling power supplies suggest a bleak winter outlook in some parts of the world.
As northern China chills, coal prices held near record highs, with power plants stocking up to ease an energy crunch that sent factory gate inflation in the world’s secondlargest economy to an atleast 25year high in September.
Meanwhile, Coal India, the world’s biggest coal miner, said it had temporarily stopped supplying nonpower users as India battles one of its worst ever power supply deficits.
China’s power crisis, caused by shortages of coal, high fuel prices and booming postpandemic industrial demand, has halted production, including at factories supplying big brands such as Apple.
Weak demand is capping consumer inflation, however, forcing policymakers to walk a tightrope between supporting the economy and further stoking producer prices.
There are few signs of any energy cost reprieve, with Brent crude oil futures above $US84 ($NZ119) a barrel on expectations that soaring natural gas prices will drive a switch to oil to meet winter heating needs.
The International Energy Agency said the crunch could boost oil demand by half a million barrels per day.
‘‘Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery,’’ the IEA said in its monthly oil report.
Top economic institutes cut their joint forecast for 2021 growth in Germany, Europe’s largest economy, to 2.4% from 3.7% as supply bottlenecks hamper output.
German government and industry sources said yesterday the Government planned to ease the pressure on consumers from rising energy bills by cutting the surcharge which helps fund renewable energy investment by 43% next year.
And in Singapore two energy providers, including one of the largest independents, are exiting the market while at least three others have stopped accepting new clients due to rocketing wholesale energy prices, company sources told Reuters.
Meanwhile, the White House has been speaking with US oil and gas producers about helping to bring down fuel costs, two sources familiar with the matter said.
The average US retail cost of a gallon of gasoline is at a sevenyear high, and winter fuel costs are forecast to surge.
Chips down
Dutch navigation and digital mapping company TomTom warned that supply chain problems in the auto sector could last well into 2022.
‘‘Collectively we have underestimated how big the supply chain issues, and especially for semiconductor shortages, have been or have become,’’ TomTom chief financial officer Taco Titulaer said.
A global semiconductor chip shortage has forced carmakers still recovering from coronavirus to halt production again.
ItalianAmerican vehicle maker CNH Industrial said last week it would temporarily shut several European agricultural, commercial vehicle and powertrain manufacturing plants because of problems procuring components.
Soaring demand is, however, proving a boon for some.
Taiwan’s TSMC, the world’s largest contract chipmaker, reported a near 14% jump in thirdquarter profit.
TSMC and Taiwan have become central to efforts to resolve the global chip shortage, which has also hit manufacturers of smartphones, laptops and consumer appliances.
Some companies, such as Toyota Motor Corp, are intensifying efforts to restart production.
The Japanese carmaker hopes to do so in December with a rebound in shipments from pandemichit suppliers, three sources said. — Reuters.