A World That’s More Expensive Is Starting to Destroy Demand
Buyers are balking at high prices for fuel, food and metals, threatening to tip economies back into recession.
Photographer: Alejandro Cegarra/Bloomberg
Prices for some of the world’s most pivotal products – foods, fuels, plastics, metals – are spiking beyond what many buyers can afford. That’s forcing consumers to cut back and, if the trend grows, may tip economies already buffeted by pandemic and war back into recession.
The phenomenon is happening in ways large and small. Soaring natural gas prices in China force ceramic factories burning the fuel to halve their operations. A Missouri trucking company debates suspending operations because it can’t fully recoup rising diesel costs from customers. European steel mills using electric arc furnaces scale back production as power costs soar, making the metal even more expensive.
Global food prices set a record last month, according to the United Nations, as Russia’s invasion of Ukraine disrupted shipments from the countries that, together, supply one-quarter of the world’s grain and much of its cooking oil. More-expensive food may be frustrating to the middle class, but it’s devastating to communities trying to claw their way out of poverty. For some, “demand destruction” will be a bloodless way to say “hunger.”
Source: Bloomberg
In the developed world, the squeeze between higher energy and food costs could force households to cut discretionary spending – evenings out, vacations, the latest iPhone or PlayStation. China’s decision to put its top steelmaking hub under Covid-19 lockdown could limit supply and push up prices for big-ticket items like home appliances and cars. Electric vehicles from Tesla Inc., Volkswagen AG and General Motors Co. may be the future of transportation, except the lithium in their batteries is almost 500% more expensive than a year ago.
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