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Global economy is struggling with stagflation

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Global economy faces stagflation as rising prices and chaos in supply chains and energy market wreak havoc on businesses










The global economy is facing a period of stagflation as rising prices and chaos in supply chains and the energy market wreak havoc on businesses.

In reports from the UK and Germany, to China and Taiwan, manufacturers warned they are grappling with rising costs, shortages and delays.

Economists worry about the risk of ‘stagflation’ – which occurs when economies stagnate while the cost of living and doing business skyrockets.

Lower growth generally means slower wage growth and higher unemployment, which would hit households especially hard at a time when prices are rising.

Barnaby Martin, credit strategist at Merrill Lynch International, said, “Inflation is suddenly everywhere.

So far, tin prices are up 74 percent, gasoline prices up 60 percent, coffee up 52 percent, aluminum up 47 percent and the list goes on. The energy crisis is already of historic proportions, with gas prices in Italy rising by 385 pc. year to date.

And more than 30 percent of the world now has inflation over 4 percent. The age of inflation is ending the age of generosity.’

Manufacturing output and new orders in the UK rose in September at the slowest pace since February, according to the closely monitored Purchasing Managers’ Index (PMI), which came in at 57.1. Any number above 50 indicates growth. Rob Dobson, a director of IHS Markit, said the UK was at risk of descending into a period of stagflation.

In the eurozone, manufacturers recorded their worst month since February.

Chris Williamson, chief business economist at IHS Markit, said: “Supply issues continue to devastate large parts of European production, with delays and shortages reported at rates not seen in nearly a quarter of a century and no signs of imminent improvement.”

In Taiwan, which is a key hub for global manufacturing, business confidence plummeted to a 15-month low, with IHS saying: “It will be critical for supply chains to improve to fully normalize operations and ensure a sustainable future.” economic recovery to get to work.’

And in China, which was one of the few countries to regain pre-pandemic levels of economic output, manufacturing activity fell for the second month in a row as factories complained of slower shipping times and shortages of materials.

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