Why Are Prices Rising So Much?https://austenmorris.com/wp-content/uploads/2023/01/a-woman-analyzes-the-prices-for-the-purchase-of-ve-2022-11-09-06-36-19-utc-scaled.jpeg25601981AMA TeamAMA Teamhttps://secure.gravatar.com/avatar/4ad9c580ca7195a1d4f6c40c38a18a15?s=96&d=mm&r=g
Why Are Prices Rising So Much?
Across the world, the prices of everything from energy to food and consumer goods have risen rapidly over the last two years.
In fact, in 2022, inflation reached a 40-year high, meaning the price of goods had risen more quickly than it had for almost half a century.
But what is inflation?
Simply put, inflation is the measure of the increase in the price of goods. A “basket of goods” – comprised of primary, popularly consumed goods, such as food items and clothes – is used by governments to determine the inflation rate.
If the average total cost of the basket increases by 6% from the previous year, then the rate of inflation is said to be at 6%.
In 2022, the global inflation rate was at 8.8%, meaning that, on average, the price of goods increased by 8.8%.
Why are prices rising?
Over the last couple of years, several significant global events have taken a toll on the affordability of goods and commodities.
The pandemic disrupted supply and demand.
One of the first events that contributed to the current climbing prices was the pandemic, which significantly impacted the cost of commercial goods.
While the pandemic was ongoing and restrictions were in place, demand for goods fell, and due to the COVID-19 restrictions, there were significant problems with shipping and logistics, which caused shipping prices to rise.
The aftermath of the pandemic caused more disruption.
When the world began to return to normal, demand for goods increased, putting pressure on supply chains and shipping, which were unequipped to handle the sudden demand.
This meant that prices increased significantly, particularly for goods and materials shipped internationally.
More than goods, in the wake of the pandemic, energy demand soared since public gatherings were no longer restricted. As such, establishments reopened, events were held, and people were using transport more, adding to the demand for energy and increasing prices.
The Ukraine-Russia war impacted energy prices.
In the wake of the pandemic – after the energy demand had already risen – Russia began its invasion of Ukraine, influencing the economy and the prices of goods in several ways.
The most significant impact was on the energy price since Russia is one of the most critical natural gas suppliers. During the conflict, the energy pipeline was severely inhibited – and much of Europe attempted to lessen its dependence on Russian energy.
However, with Russia supporting such a large proportion of the world’s energy needs, they had the power to raise prices as scarcity of gas began to have a noticeable impact on parts of Europe, with some countries even experiencing blackouts.
This saw energy prices skyrocket for both domestic households and businesses.
The conflict also impacted the prices of other goods.
Virtually every industry is affected by energy prices, with business owners paying more to facilitate operations, including manufacturing and shipping goods and running public-facing businesses such as restaurants and shops.
This increased cost encouraged an increase in prices of everything from goods to experiences as businesses strove to maintain profit margins.
In addition to energy, the Ukraine-Russia war impacted the price of some essential goods and raw materials.
Ukraine and Russia are significant exporters of agricultural materials, including wheat and grain, and certain metals, including gold, lead, nickel, iron ore and coal.
The increase in prices of these products due to the lack of available supply from Russia and Ukraine during the conflict – has affected the prices of numerous goods that depend on these raw materials.
Will prices continue to rise?
Though these extreme market influences continue to climb prices, experts believe that inflation will reduce significantly in 2023.
However, it’s important to note that this doesn’t mean prices will fall from their current high level. In other words, prices won’t rise so quickly in the coming year, but you should still expect to spend a significant amount on goods and energy in 2023.
However, the cost of energy – which has impacted the price of virtually everything – is falling. While this effect is unlikely to be seen in 2023, lowering oil and gas prices should begin to reduce the cost of living once more in 2024.
“I’ve been always targeted by many financial advisors and International investment groups over the years. I have had one fund with an offshore investment group before which I canceled in 2008 and since then I was uncertain if I should do something again. I met Kirk in 2014 and he kept contact with me over the next few years. In 2017 I thought of investing and starting some fund and I have immediately contacted Kirk since he has left a very strong impression as a competent, pleasant, and very well informed advisor. Now I have a few funds with AMA and I am very happy with the service level, professionalism, and guidance from Kirk. I am very confident that I will reach my future goals.”
Ivan Stefanovic - Commercial Director - Scania
“Chad is a pleasure work with, throughout my dealings with him he has always maintained care for our relationship over and above my portfolio. He has ensured our communication and working timelines are met to the highest standard. I’ve found Chad to be very thorough and more than happy to take the time always to keep me updated and continue to answer all questions in a timely and professional manner. He is also very personable and courteous, with a keen attitude to deliver the best service. Chad keeps updated on current market developments and regulations, and his attention to detail and analysis of my portfolio has been most informative and insightful. In my opinion, Chad is a knowledgeable and professional advisor, and I feel comfortable entrusting my international arrangements and overall portfolio management to him. I would happily recommend Chad to others who require assistance regarding their financial planning.”
Warren Drue - Partner- WEBBER WENTZEL
“Warwick Hamilton has, since 2014, been the financial advisor dealing with the proceeds of my UK pension, invested via QROPS in an STM Pension Transfer Plan. I am sure that I am not his biggest client but you would not think so, given the excellent support and service that he gives me. I have been continuously impressed by the way he ensures that these investments are managed to perform well, align with my risk profile; and with his ethical, informative, honest and straightforward way of handling those affairs. I have kept these investments with Warwick despite approaches to change financial advisors because he ensures that I am kept well informed and I trust him.”