September 2021 – Mariana Vargas – The pandemic stroke by surprise to many countries, some didn’t know how to handle it, there for their economies, governments and people ended up affected. A new way of living was created and forced upon many; social distance, the urge of individual transportation, uncertainty, no public gatherings, the use of masks every single day to wherever you go, home office, among many other, all this changes in our regular life where rough, but they were also expensive. Governments tried everything to soften the punch, but the bruise will always end up showing, right?
After 2020, the World Bank continued to publish the annual percentage of global inflation – continuous increase in the general level of prices of goods and services – showing a growth of almost 2% compared to the figures published in 2019. This growth is a consequence of the forced shutdown of economies during the pandemic, due to labor decay in various sectors, fear and uncertainty.
Many world powering countries like United States decided to help their people and soften the punch with an economic stimulus package, an injection of millions of dollars from the Federal Reserve, directed to decrease unemployment rate, increase spending, and, eventually, counter the impact of a future recession.
For some, this is one of the reasons inflation rates have been increasing. More money will alter the basic supply – demand behavior. We are witnessing higher demand and global supply chain issues for most of the goods and services in the market. Making prices go up.
The perfect example is the oil sector. Countries are consuming the same and more amount of energy, now with people spending more time in their homes and soon using heating systems. However, world suppliers are stuck with uncertainty in the market and lowering production because of it. Making oil prices go up and letting interpretation state that global inflation is catching up and not slowing down.
The reopening of economies is another trigger for higher prices. Almost two years ago, the hotel market suffered, due to lockdown measures. Currently, this market is reopening and has increased 10% activity compared to a year ago, however many users have complained about higher prices. This is happening to several businesses. After being out of business for a while, laying off your employees and going into deficit, reopening your business translates into being able to collect as much money as you can with the time you have.
This doesn’t mean it will be permanent. In the contrary, what is expected from these businesses is internal adjustability and then getting back on track with more accessible prices. It’s all about making time and patience for the market to adjust to the new normal. For sure bruises are showing in sectors the government didn’t expect.