How the epidemic became accompanied by stagflation

It was a summer of unpleasant surprises for the global economy. You are United State, a Europe it’s at China It is growing slower than investors expected. The prices that consumers pay are rising at a terribly fast pace in the United States. Even in the eurozone, which is used to tepid inflation, prices in August were 3% higher than they were in 2020, the highest level in a decade. Economies struggle with shortages of parts and labour, expensive and slow transport of goods, and the confusing difference in the adoption of Close.

spread of delta variable This is to blame, but the way the pandemic is affecting the economy is changing. The world got used to the violent growth of the virus, as waves of infections brought activity to a sudden halt and prices fell or even fell. On the other hand, delta appears as an inflationary force that undermines growth less dramatically but pushes inflation higher. This alternative burdens consumer spending in the rich world, but does not cause the collapse. In countries where there are many vaccines, cases no longer prevent consumers from moving around as much. Europe’s service sector has reopened amid a wave of infections from the Delta.

Consumers appear to be less afraid of illness even though there are enough unvaccinated people to fill hospitals. A year ago, the number of customers in American restaurants was about half as many as in 2019. Now, service is about 10% less than that period, even though hospitals are three times as crowded.

No JapanThe emergency sweeping Tokyo doesn’t seem to be driving shoppers away from stores. Only in countries with strict policies aimed at stamping out the virus are people confined to their homes. Australia NS New Zealand Facing a new recession as a result of the lockdowns, the service sector in China appears to be shrinking.

Meanwhile, the spread of the delta variant continues to hamper global merchandise supplies, as consumers, especially Americans, look to buy more cars, gadgets and sporting equipment than ever before.

An outbreak in Southeast Asian countries with low vaccination rates is causing temporary shutdowns in factory production and logistics networks, which in turn prolongs disruptions in supply chains.

In the United States, retailers, including Gap and nikeThe White House is pushing to donate more vaccines to Vietnam, which is critical for their factories to get back to work. Scarcity leads to higher prices.

The shift in the relationship between the virus and the economy has implications for policymakers. They will not be able to repeat the hoax of the epidemic at the beginning of the epidemic by restricting the movement of people as a way to contain the spread of the virus, while releasing financial aid to create a compensating boom in demand for goods.

The recovery of the service sector is currently the only fast track to rapid growth, because there is an opportunity. US household spending on services in the second half was about 3% lower than the level recorded in 2019 in real terms.

If the delta variable spread is hurting service industries like entertainment and hospitality, more financial aid will only lead to more inflation. It’s also hard to argue that fear of the virus is scaring consumers away from shopping and that government restrictions to slow the spread of the disease have little additional economic cost.

The weak link between issues and movement of people and the service sector’s need for growth increases the cost of shutdowns.

If pressure on hospitals results in even countries with high vaccination rates, such as the United Kingdom, restricting services during the winter, the economic damage will be significant, and the benefits will be less.

The wave of coronavirus infection from the delta variant may soon subside, relieving pressure on the global economy.

If it does not, or if another variable takes its place, it becomes difficult to justify the trade-offs involved in fighting the virus. / ROMINA CACIA translation