Prices pinch families as inflation surges globally

Omicron raises fears economic situation could get even worse

BUDAPEST, HUNGARY From appliance stores in the United States to food markets in Hungary and gas stations in Poland, rising consumer prices fuelled by high energy costs and supply chain disruptions are putting a pinch on households and businesses worldwide.

Rising inflation is leading to price increases for food, gas and other products and pushing many people to choose between digging deeper into their pockets or tightening their belts. In developing economies, it’s especially dire.

“We’ve noticed that we’re consuming less,” Gabor Pardi, a shopper at an open-air food market in Hungary’s capital, Budapest, said after buying a sack of fresh vegetables recently. “We try to shop for the cheapest and most economical things, even if they don’t look as good.”

Nearly two years into the COVID-19 pandemic, the economic impact of the crisis is still being felt even after countries raced out of debilitating lockdowns and consumer demand rebounded. Now, another surge of infections and a new coronavirus variant, Omicron, are leading countries to tighten their borders and impose other restrictions, threatening the global economic recovery.

Omicron has raised new fears that factories, ports and freight yards could be forced to close temporarily, sending prices even higher.

“A new round of infections could further aggravate supply chains, putting even more upward pressure on inflation,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

The economic reverberations are hitting central and Eastern Europe especially hard, where countries have some of the highest inflation rates in the 27-nation European Union and people are struggling to buy food or fill their fuel tanks.

A butcher at a Budapest market, Ildiko Vardos Serfozo, said she’s seen a drop in business as customers head to multinational grocery chains that offer discounts by buying in large wholesale quantities.

“Buyers are price sensitive and therefore often leave us behind, even if our products are high quality. Money talks,” she said.

The International Monetary Fund predicts world consumer prices will rise 4.3 per cent this year, the biggest jump since 2011.

But if central banks move too aggressively too soon to control inflation, it could short-circuit the economic recovery, said Carmen Reinhart, chief economist at the World Bank. She also worries about higher food prices that primarily hurt the poor.

“Food prices are a barometer for social unrest,” Reinhart said, noting the Arab Spring uprisings were caused partly by higher food prices.