05/18/2021, 15.30
ASIA
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After COVID: inflation, a risk to global recovery

Companies are stocking up to meet rising demand. Shortages of parts, like microchips, are driving up prices. Transportation costs are also up. China's economic recovery is slowing as domestic output and consumer demand are expected to drop.

 

Hong Kong (AsiaNews) – After COVID-19 vaccination campaigns boosted economic recovery in many countries, the world faces a new danger: inflation.

Higher demand has led to shortages of certain key goods, bottlenecks in international transportation, and higher production costs. The inflationary trend is also fuelled by government economic stimulus packages designed to overcome the pandemic-related recession.

As manufacturers stockpile materials to meet future orders, global supply chains are pushed to the brink, with prices up in many sectors.

Whilst experts expect stable growth in production costs over the next 12 months, the United Nations in April noted that this will affect food prices, which have risen for 11 months in a row, a trend set to continue amid weather concerns and China’s crop-buying spree.

Shortages of certain parts have had a significant impact on prices. The most striking case is microchips, which go into all hi-tech products.

Due in large part to greater, post-pandemic demand for technological goods, microchip shortages have negatively impacted car and smartphone manufacturers in East Asia and South-East Asia

The high demand for finished goods has revived shipping, clogging up ports and delaying deliveries. This is driving up costs for manufacturers, which will be passed on to consumers, unless productivity improves.

There is widespread concern that China will pass its inflation onto importing countries. According to China’s National Bureau of Statistics, manufacturing prices reached their highest point last month since 2017.

Yet, the latest data indicate that China’s recovery is still uncertain. In April, industrial production grew by 9.8 per cent year-on-year, down sharply from 14.4 per cent in March.

Even more significant is the slowdown in retail sales growth, an indicator of consumer spending. It stopped at 17.7 per cent last month, almost half compared to March (34.2 per cent).

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