The effect was also felt in retail and foodservice sectors following the menu price hikes in the middle of 2021 between 8% to 17%. E.g., McDonalds in the USA adjusted their menu prices by 8% as to compensate the rising ingredient costs. The perceived increases have impacted all the industries as well as the growth of the inflation rate. Furthermore, the inflation rate projection for this year will be expected to soar high as Russia and Ukraine crisis continue to escalate tensions. These uncertainties may severely hit the global market following the drastic price hikes in energy, crude oil, corn, and wheat.
Two major factors that fueled 2021 inflation rates were supply chain constraints and labor market supply shortages.
McDonalds in the USA adjusted their menu prices by 8% as to compensate the rising ingredient costs.
US and Germany registered 7% and 3% inflation rates in 2021 compared to 1% for both countries in 2020.
On the other hand, foodservice brands such as Krispy Kreme, Wendy’s, Chipotle, Taco Bell, Chili’s, Domino’s Pizza, The Cheesecake Factory, McDonalds, and Dunkin’ hike prices to make up with the inflation. Significant price increases were recorded in leading food chains such as Taco Bell at 10%, McDonalds’ and Dunkin’ at 8% price hikes. Among the other reasons discussed above, the foodservice brands were forced to increase their prices due to increases by their food suppliers. According to Brazil’s statistics agency IBGE, meat prices rose by 8.45% in 2021. Brazil is the largest beef exporter in the world and inflation is hitting the source of the worldwide meat which will eventually affects all.
Chanel, Louis Vuitton, Crocs, Gucci, Michael Kors, Hermes, Jimmy Choo, Ralph Lauren, Celine, and Dior were among the leading global luxury brands who have imposed price increase in 2021.
Further increase will be expected to happen this year as Russia and Ukraine crisis continue to intensify. Russia and Ukraine are well known suppliers of more than a quarter of global wheat exports in the world. While the latter country accounts for almost half of sunflower oil exports. With the on-going war, supply chain may experience heavy food supply disruptions and will worsen the current supply chain bottlenecks. E.g Ukraine being the breadbasket of Europe, Middle East, and North Africa will cause major supply shortages and food security issues in the market if the produced grains fail to be shipped to the destination countries. Currently, the war has led to an embargo on all commercial vessels in the inland sea of Azov connecting to Black Sea which affects the sea transport of the food supplies. This will push more pressure on suppliers and exporters to a higher price hike. With these changes, countries are diversifying and repurposing their food supply sources as to keep up with the surging market demand.
Meat prices in Brazil rose by 8.45% in 2021
As reported by GCC Stat, the aggregated GCC Consumer Price Index in 2020 was 100.08, higher by 2% compared to the previous year. Alcoholic Beverages, Tobacco, and Narcotics registered the highest commodity prices with 113.29 index and reached 7% inflation. The Value Added Tax (VAT) imposed in UAE, Bahrain, Oman, and Saudi Arabia intensify the price index’s increment due to its tax implications. Bahrain adjusted their VAT rates from 5% (2019) to 10% (2022) while Saudi Arabia implemented VAT rates from 5% (2018) to 15% (2020) . Meanwhile, the recent implementation of VAT in Oman last April 2021 has taken a toll to the increasing inflation of the country. Excise Tax is also another factor to consider which were adopted by the 5 GCC countries excluding Kuwait. UAE initiated the excise tax across all its emirates in 2017 followed by Saudi Arabia and Bahrain in the same year. Qatar and Oman were the last nations to implement the sin tax in 2019 and 2020. The imposition of excise tax aims to reduce consumption of unhealthy and harmful commodities while the collected revenues will be used for public service projects. Tobacco products are subject to 100% excise tax which was reflected in the high consumer price from 2017 up to the recent year. Food, non-alcoholic beverages, restaurants, hotels, and furnishings are also dominating the consumer price index with the indices of 108.46, 105.44, and 103.19, respectively. The mentioned sectors are some of the contributors to the excise taxes that are subject to the following rates such as energy drinks at 100% in UAE, soft drinks at 50% in Saudi Arabia and Bahrain, and beverages at 50% in Oman. Major economies launched generous government backed funding programs of those affected by layoffs as a result of COVID. Governments in the GCC however had minimal job backing programs to support their local workers. Locals in the GCC are mostly employed by the government and governments retained their local workers despite shutdowns. The local GCC consumer was not affected by the global layoff phenomenon witnessed and benefitted from some of the government backing stimulus packages launched to support the different economies in the GCC. Job security stimulated by better supporting government measures led to higher consumer spending and therefore fueling inflation.The jumped in the prices were caused by the manpower shortages which disrupts the overall business activities of the retail, F&B, and service markets in the region. These industries’ labor market supply in Kuwait, Qatar, and UAE are mainly occupied by the overseas workers. International workers were affected after the government’s-imposition of flight restrictions which prevented employers to hire and attract potential overseas workers abroad. Companies which had expansion plans had to recruit from the local market and provide staff incentives to join their firms at a higher rate. This salary change was reflected in Salaries in the GCC’s surged by 9% in 2021 as compared to 1% in 2020. However, less drastic effect in Saudi Arabia and Oman labor markets were observed due to its localization of manpower.
The average shipping price of a 40-foot container surged by 348%
Inflation is hitting everyone!
Relaxing after a long day of Zoom meetings while reading the daily infection rates and eating your favorite KFC meal. One thing that shocks you more than the daily ICU count is your blazing twist meal’s price. Once done with the last bit of your “more” expensive meal, your plumber is asking for 50% more than what he usually asks. This is a common feeling everyone is having, and it is a global issue affecting everyone around the world.
Kuwait business impact during Coronavirus
Kuwait is facing unprecedented challenges and is enforcing major restrictions to protect its citizens yet those measures had a severe business impact. Global Markets is utilizing its wealthy current and historic primary research findings, Umbrella platform, and advanced assumption modelings to illustrate the daily revenues impact of the Coronavirus while comparing it to previous years.