From beef bowls in Tokyo to fried chicken in London, consumers are beginning to feel the pinch from the surge in costs coursing through the global economy.
The rebound in economic activity as coronavirus restrictions are eased has exposed shortages across supply chains, with companies scrambling to find workers, ships and even fuel to power factories, threatening the recovery.
Britain’s biggest chicken producer warned that the country’s 20-year cheap food binge is coming to an end and said food price inflation could hit double digits.
“The days when you could feed a family of four with a £3 ($4) chicken are coming to an end,” Ranjit Singh Boparan, owner of the 2 Sisters Group, said.
An acute shortage of warehouse workers, truckers and butchers as the world’s fifth-largest economy deals with Brexit as well as Covid-19 is exacerbating strains which are being felt globally by international business.
IKEA is leasing more ships, buying containers and re-routing goods between warehouses as the world’s largest furniture brand seeks to mitigate a “perfect storm” of global supply chain disruptions.
Jon Abrahamsson, chief executive at Inter IKEA, told Reuters IKEA warns supply chain disruptions likely to last into 2022 he expects the crisis to extend into 2022, with the biggest challenge getting goods out of China, where around a quarter of IKEA products are made.
IKEA said stores in North America have been hardest hit by product shortages, followed by Europe.
In the United States, President Joe Biden on Wednesday urged the private sector to help ease supply chain blockages that are threatening to disrupt the US holiday season.
Biden said the Port of Los Angeles would join the Port of Long Beach in working round-the-clock to unload about 500,000 containers, while Walmart, Target and other big retailers would expand overnight operations to help out.
Even in Japan, where weak growth has meant that prices of many things — as well as wages — haven’t risen much in decades, consumers and businesses are facing a price shock for basics such as coffee and beef bowls.
Japan’s core consumer inflation only stopped falling in August, snapping a 12-month deflationary spell.
Economists and policymakers expect to see recent price rises reflected in official data in the coming months.
With central bankers on high alert and inflation in Spain, Ireland and Sweden hitting 13-year highs, European Central Bank President Christine Lagarde repeated that the upswing in Europe is seen as temporary and said there were no signs that the recent surge is becoming embedded in wages.
“The impact of these factors should fade out...in the course of next year, dampening annual inflation,” Lagarde said.
Eurozone inflation is expected to hit 4% before the end of the year, twice the ECB’s target, and a growing number of economists see it remaining above target throughout 2022.
Dwindling power supplies suggest a bleak winter outlook in some parts of the world.
As northern China chills, coal prices held near record highs, with power plants stocking up to ease an energy crunch that sent factory gate inflation in the world’s second-largest economy to an at-least 25 year high in September.
Meanwhile, Coal India, the world’s biggest coal miner, said it had temporarily stopped supplying non-power users as India battles one of its worst ever power supply deficits.
China’s power crisis, caused by shortages of coal, high fuel prices and booming post-pandemic industrial demand has halted production at numerous factories, including many supplying big brands such as Apple.
Weak demand is capping consumer inflation, however, forcing policymakers to walk a tightrope between supporting the economy and further stoking producer prices.
There are few signs of any reprieve in energy costs, with Brent crude oil futures above $84 a barrel on expectations that soaring natural gas prices will drive a switch to oil to meet winter heating needs.
The International Energy Agency said the crunch could boost oil demand by half a million barrels per day (bpd).
“Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery,” the IEA said in its monthly oil report.
Top economic institutes cut their joint forecast for 2021 growth in Germany, Europe’s largest economy, to 2.4% from 3.7% as supply bottlenecks hamper output.
In response to the crisis, the White House has been speaking with US oil and gas producers about helping to bring down fuel costs, two sources familiar with the matter said.
The average US retail cost of a gallon of gasoline is at a seven-year high, and the US Energy Department expects winter fuel costs to surge.
Oil and gas production remains below the nation’s peak reached in 2019.
Dutch navigation and digital mapping company TomTom warned that supply chain problems in the auto sector could last well into 2022.
“Collectively we have underestimated how big the supply chain issues, and especially for semiconductor shortages, have been or have become”, TomTom chief financial officer Taco Titulaer told Reuters.
A global semiconductor chip shortage has forced carmakers still recovering from coronavirus disruptions to halt production again.
Italian-American vehicle maker CNH Industrial said on Wednesday it will temporarily shut several European agricultural, commercial vehicle and powertrain manufacturing plants because of problems procuring components.
Soaring demand is, however, proving a boon for some.
Taiwan’s TSMC, the world’s largest contract chipmaker, reported a nearly 14% jump in third quarter profit.
TSMC and Taiwan have become central to efforts to resolve the global chip shortage, which has also hit manufacturers of smartphones, laptops and consumer appliances.
Some companies, such as Toyota Motor Corp are intensifying efforts to restart production.
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