Prices like a virus: Economist claims – waves of price hikes

Even before the surge of price hikes due to the pandemic fully reached consumers, there was a war in Ukraine that further boosted price growth.

This is pointed out by economist Wolfgang Schnellbacher of the consulting firm Boston Consulting Group (BCG).

He says that even if the war stopped soon, it would take at least a year until the consequences hit consumers completely.

“The price increases come in waves. We saw that with fuel prices. The next increase will be significant in the next three or four weeks, and it can take up to a year for the last wave to hit us,“ Schnellbacher told the APA agency.

He pointed out that inflation would be a topic that would follow us a little longer.

„In the chemical and machine industry, the price increase last month was at the level of the entire last year. In the case of groceries, the prices increased by 11 percent, but only 5% increase has reached the buyers so far. When it comes to hygiene products, the price increase reached eight percent, while only two percent reached the customers,“ the Austrian expert added.

The boycott of energy product import from Russia, according to him, would have unprecedented consequences.

„It is more doable with petroleum than with gas. With gas, it has to be said that everything that is happening now is purely psychological. The quantity of gas coming from Russia is not lower. No one has so far calculated what suspending gas supplies would really mean for the supply chain,“ he explained.

Massive decline in purchasing power

He pointed out that when energy product prices rise, the costs for each company increase, and this then spreads to all areas.

Schnellbacher believes that all the instruments for mitigating the effects of rising energy product prices have already been used. Further interest cuts are not possible, because, he says, at the time when we are approaching the inflation of six percent, interest rates, which are already around zero, cannot be further reduced.

Households, he says, are facing a massive decline in purchasing power due to rising inflation. Schnellbacher says the current situation is fragile as it has not been in a long time.

Izvor: 021, Tanjug

Foto: Pixabay