Many factors, ranging from foreign policy to environmental circumstances, can have an impact on a country’s inflation. However, there has recently been a global issue that affects all nations.
Even in areas where the Coronavirus pandemic has not arrived with such ferocity, supply chain disruptions have caused significant distress. This type of phenomenon occurs as a result of the international economy’s level of connectivity.
Let us split this link between inflation and supply chain down into three areas to further understand how it works.
1. How much does a raw material cost?
Any commodity extraction demands a large number of qualified employees in the region (which are difficult to come by), well-established planning, and basic infrastructure. And nowadays, corporations must comply with a slew of environmental regulations that aren’t cheap.
Today’s market volatility, which combines strong demand with port closures, is a shipper’s worst nightmare. For example, even if the production meets the demand on time, there is no assurance that the final consumer will be served on time.
Price increases are unavoidable under these circumstances.
2. Inflation and fuel
Everything must be carried in some way, and as the price of gasoline rises, so will the price of all commodities. Even more so in light of the recent sanctions put on Russia, the world’s second-largest oil producer.
3. Market inflation and global integration
The global economy has reached never-before-seen levels of integration. The entire globe uses Chinese items as well as American and European ones. If there are any issues with the supply chain in these areas, inflation will become a certainty in the world economy.
The pandemic has also had a huge impact on nations with smaller economies, which frequently produce vital raw commodities such as wood and minerals. The workforce and consumer markets in these areas are experiencing unprecedented conditions. Also many governments are unsure how to handle the issue, driving up the price of these commodities even more.
Know what’s going to happen next.
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