Inflation Inflation in the U.S. spiked in April 2021 and continued to increase until it peaked in July 2022. The primary factors driving recent inflation were global – outside the control of the Federal Reserve. Those factors peaked in 2022, and included price spikes in global energy and food prices related to Putin’s invasion of Ukraine and lingering supply chain issues which contributed significantly to inflation. Russia is a leading global exporter of oil, and oil prices spiked from approximately $75 a barrel in late December 2021 to almost $120 a barrel in June 2022 after the Russian invasion of Ukraine in February caused great uncertainty in global oil markets. The increased oil prices not only affected global energy costs, but also transportation costs for goods worldwide, both key factors contributing to global inflation. The Russian invasion of Ukraine also had a significant impact on food prices. Russia and Belarus comprise nearly 20 percent of the global export market share of all fertilizers, and global fertilizer prices rose to record levels in 2022. The Russian invasion of Ukraine triggered import-export restrictions that compounded supply problems. Wheat prices spiked 50% in early 2022, as wheat exports were disrupted by the war. (Russia and Ukraine accounted for approximately 30% of global wheat exports prior to the war.) Supply chain disruptions, exemplified by the semiconductor chip shortage, became prominent in 2021 and continued into 2022. Between April 2021 and July 2022, new vehicle prices in the U.S. increased nearly 16% with sales declining by over 26%. In 2023, the mitigation of these global factors led to a significant decline in inflation throughout the world. After peaking at nearly $120 a barrel in June 2022, oil prices were approximately $75 a barrel in June 2023. The October 2023 price of wheat declined nearly 50% from its peak in February 2022. Supply chain problems also generally declined, as reflected by a 1.9% price increase (rather than double-digit) for new vehicles for the 12 months ended October 2023. The chart below demonstrates how inflation was a global problem, not simply caused by U.S. domestic factors. Note the trends in inflation are generally similar across countries. The mitigation of global factors that contributed to inflation are reflected by the significant decline in inflation that has generally occurred around the world since 2022. 2022 Peak Annualized Inflation Rates and 2023 Inflation Rates (Source: U.S. Bureau of Labor Statistics, Eurostat, Canadian Consumer Price Index, Rateinflation.com) 2022 Peak Jan. 2023 April 2023 July 2023 Sept. 2023 Oct. 2023
Euro Area
10.6
8.6 5.9
7.0 4.4 8.7 6.3 7.0 4.9
5.3 3.3 6.8 4.8 6.0 3.2
4.3 3.8 6.7 4.5 5.4 3.7
2.9
Canada
8.1
-
United Kingdom
11.0
10.1
4.6 4.3
Mexico
8.7 7.8 9.0
7.9 7.8 6.4
Australia*
-
U.S. 3.2 *Australia provides quarter to quarter inflation. 2023 numbers are for quarter ending previous month. 5.4 rate is for quarter ending September 2023.
Central Wisconsin Report - Spring 2023
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