Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
Though the latest U.S. inflation report didn’t break records like the month prior, it’s clear that high prices are sticking around for a while. The Consumer Price Index (CPI), which measures price changes and is a key indicator of inflation, showed that in July, prices were 8.5% higher than they were twelve months ago.
Americans are feeling the pinch as soon as they wake up. Everything from food to gas prices has increased in cost.
But they aren’t the only ones hurt by high prices. Inflation is impacting countries around the globe, illustrating how connected we are—and how high prices have wide-ranging effects.
Inflation Rates by Country
It’s important to note that each country calculates its inflation rate a bit differently and regional circumstances can also affect the rate. A 10% inflation rate in the U.S., for instance, isn’t necessarily the same as a 10% inflation rate in Turkey.
The factors underlying inflation in each country or geographic region are complex. Government policies, fiscal and monetary interventions, interest rate changes and even extreme weather can all contribute to inflation.
For example, energy and fuel costs have been major drivers of inflation in many countries. In the United Kingdom, supply chain issues due to a cold winter and lower-than-usual availability of wind energy have sharply pushed up energy costs, according to the U.K. Office of National Statistics.
So although this overview of inflation rates isn’t a strict apples-to-apples comparison, it can give us a broader outlook on what is happening globally.
The U.S. inflation rate of 8.5% in July was a slight improvement from June’s 9.1%, which was a 40-year high.
The price of eggs rose by 38% between July 2021 and July 2022, according to the latest CPI report. Fresh whole milk is up 14.5%. The price for cereal has risen 16.8%.
Meanwhile, the price of natural gas is up 30.5% and unleaded regular gasoline is up 44.6%.
Inflation reached a new 40-year high of 10.1% between July 2021 and July 2022 in the United Kingdom, according to the U.K.’s Office for National Statistics.
How does that break down for the average consumer? Egg prices increased by 14.6% year-over-year. Low-fat milk rose 34%, and natural gas prices rose by 95.7%, according to the Guardian.
Higher prices at Canadian gasoline stations is part of the reason its consumer inflation reached 7.6% for the 12-month period ending in July. The previous CPI report showed 8.1% inflation, the largest yearly change since January 1983, which was driven in part by high gasoline prices.
For perspective, consumers paid 35.6% more for gasoline this July than in July 2021.
Year-over-year comparison for July showed China’s inflation rate climbed to 2.7%, according to the National Bureau of Statistics of China. Compared to a year ago, food prices rose by 6.3% (with notable year-over-year increases in the meat and fresh fruit categories) and fuel for vehicles rose 24%.
Like many parts of the world, the prices of transportation, education, and entertainment have increased as well as daily necessities, clothing, housing and health care.
In Japan, the inflation rate was 2.6% in July, an increase from June’s rate of 2.4%. This is the 11th straight month of consumer price increases in Japan. Part of the reason for these increases is due to higher fuel and food costs following Russia’s invasion of Ukraine, and a declining yen.
Turkey’s inflation rate jumped to 79.6% in July, a 24-year-high. While there are many reasons for the rise in the country’s annual inflation rate, the war between Russia and Ukraine, commodity prices increasing and a slide in the nation’s currency since December are among them, according to Al Jazeera.
High prices and a devalued currency have impacted consumers so much that the nation has raised the minimum wage twice since the start of 2022.
Australia’s Consumer Price Index rose 6.1% in June (the latest data available) compared to last year, according to the Australian Bureau of Statistics. The increase was driven in part by rising prices for new housing, fuel and furniture.
Many countries in Africa are realizing high rates of inflation. South Africa reached a 13-year inflationary high in July with a 7.8% annual increase, driven largely by fuel and food prices.
Israel hit a 14-year high in July as its annual inflation reached 5.2%; a year ago, annual inflation was 1.5%. According to Israel’s Central Bureau Of Statistics, fresh fruit, transportation, housing and entertainment costs were the primary drivers of the increase.
What’s Driving Global Inflation?
Market analysts and strategists cite several factors behind global price hikes.
Kristina Hooper, chief global market strategist at Invesco, references two textbook examples why inflation is currently high: demand-pull inflation and cost-push inflation.
Demand-pull inflation occurs when prices increase due to increased demand, she explains. Demand-pull inflation can be driven by increased government spending (for instance, providing stimulus checks).
If consumers expect higher prices in the future, they’re more likely to buy today—and that becomes a self-fulfilling prophecy when it comes to inflation expectation, according to Hooper.
The other type of inflation we’re seeing, cost-push inflation, leads to price increases when the supply of goods and services is disrupted. High prices for oil and natural gas are good examples here.
The global pandemic had a great deal to do with rising inflation, Hooper explains. “We turned off [the] economy, and then we turned it back on,” she says.
When the economy started growing again, many countries faced similar challenges with labor sourcing and supply chain disruptions. “That contributed to scarcity of supply just as demand increased,” Hooper notes.
Patrick J. O’Hare, chief market analyst with Briefing.com, agrees the global pandemic was a major contributor to our inflation woes. When the economy restarted, American consumers, armed with stimulus money, were ready to start spending again. The labor market needed to ramp up to meet that new demand, except many people were still concerned about Covid-19 and not ready to return to work.
This concern wasn’t limited to workers in the United States. “With the sources of production offshore being kind of gummed up by a lack of available labor, the supply chain snarl really exploded,” says O’Hare.
At some point, labor sourcing and supply-chain issues began to sort themselves out—but then Russia invaded Ukraine, creating a host of new supply issues. “If we look at cost-push inflation, one of the key drivers is the higher price of commodities,” Hooper adds, which is exactly what took place in early spring.
“And it wasn’t just energy. It’s also agriculture.” Ukraine, she reminds us, has always been considered “the breadbasket of Europe,” for its rich agricultural offerings.
Global Inflation to Continue into 2023
Living through a pandemic within a global economy that relies on each other for everything from fuel to food means we’re all in this together.
Yet while the entire world is dealing with inflation, Hooper is quick to note that every economy is unique, as is every economy’s brand of inflation. It really is dependent upon the specific factors in that particular economy.
For example, United States inflation is both demand driven and supply driven. Some of the energy and food price increases were demand driven, and that’s easier to control by central banks: “If you raise rates enough, you can hit the economy over the head with a sledgehammer and cool demand,” Hooper says.
European countries including the United Kingdom, Germany, Spain and Italy have been impacted by Russia’s invasion of Ukraine, according to O’Hare, since those countries are oil importers.
“There’s only so much energy usage that is discretionary,” Hooper explains. “If it’s cold in the winter, you need to heat your house and so there’s nothing that the European Central Bank can do in raising rates that will help ease energy inflation.”
Some Asian countries also rely on Russia for commodities, which drives up inflation due to the war between Russia and Ukraine. Turkey, for example, is dependent on oil and natural gas from Russia. Meanwhile, China is striving for energy independence, which contributes to an inflation rate that’s less severe than the increases in other countries.
What’s happening across borders or oceans is not unlike what we’re seeing in the United States with high gas prices. “People have to make choices in terms of where they’re going to spend their money,” O’Hare says. “And when energy costs keep taking away a larger pie of your disposable income, the trade off is you might have to cut back on discretionary purchases, which then ultimately slows your nation’s rate of economic growth.”
In the U.S., inflation didn’t happen overnight and it won’t come to an end overnight. “There are no miracles coming,” Hooper says. “Inflation is going to take time to get down to where the Fed’s target is.”
Hooper also reminds us that some things are beyond the Federal Reserve’s control. “The Fed can only control demand,” she notes. “It cannot control Russia’s invasion of Ukraine; it cannot control supply chains in China.”
While it will take time, we’re starting to see some supply-chain pressures easingm, and the Covid situation has improved. Still, we may not see some reprieve on inflationary pressures until well into next year and maybe even toward the end of 2023, according to Hooper.