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How the virus affected the price of trees

The sudden economic downturn in the epidemic has changed dramatically with changes in the way consumers use it around the world, leaving the effects of rising prices unchanged from their experience.

Economic growth at high prices is a major concern for investors and bankers. But part of that can be criticized Covid-19 disease – is an important consequence of government interpretation.

Price fluctuations are measured using a basket of goods and services which are meant to represent what people are buying. Items are rated according to the amount spent.

Breathing: a new season?

Prices are rising in many countries. FT checks if inflation has returned.

DAY 1: The development economy has not experienced the downturn in many years. Is this about to change?

DAY TWO: International cooperation between investors on how to promote economic and social stability is ruined.

DAY 3: Canary in US coal mines: consumer vehicles.

Day 4: How HIV can affect the rate of inflation.

Day 5: Because rising prices in developing countries it is a problem for developing countries.

Around the world last year when the epidemic broke out, people stopped vandalizing restaurants, airports and other banned items for about one night.

As a result, real-world experiences of swelling differed from a top-of-the-line rate of 0.89% in the same month last summer according to research by Harvard professor Alberto Cavallo. US economic decline is likely to be 0.5% lower by 2020 according to Cavallo’s estimates.

The shift is fast approaching as more and more economics re-engage in social media, economists have warned – making it difficult to interpret the government’s move to change prices with central banking principles.

Most US and eurozone pricing calculations are different, but both methods pose the same problem.

Similar calculations in the US

The US Bureau of Labor Statistics uses the findings of a study that is changing the realities of the two years. As a result, since the outbreak began, inflation reports have been calculated using the weight of the pre-existing world.

Inadequacies are particularly acute in both groups.

Line chart of% credit card changes and credit cards showing Lockdowns forcing significant changes in US performance

Consumer spending rose by 29% in March last year, according to a report from Opportunity Insights. The demand increase caused prices to rise 2.7 percent per month.

In contrast, travel costs have dropped by 70% in April last year and prices have dropped by 7% since the beginning of the year. The results remain the same: travel costs were 25% less than the epidemic in May this year.

According to economists, what is happening is that a legitimate calculation of customer value has mitigated the price changes that people experience in everyday life.

“You can see why the CPI was so low during the economic downturn,” said Miguel Faria e Castro, an economist at the Federal Reserve Bank in St Louis. “As a result of this economic downturn, things are starting to change more than ever before.”

As a file of US steel reopening and closing at the end, the results have changed.

For example, the decline in cars and vehicles last year has boosted the prices of used cars. Since Americans have been spending less on travel since the beginning of the epidemic than the CPI weight indicates, April’s inflation rate – where he wrote a great leap – it was probably an exaggeration.

The line chart for% indicating Official US CPI has reduced the economic downturn during the epidemic

“In April, what caused the jump to one-third was in the old cars and trucks. That was the main driver of it,” said Cavallo, who used real-time from Opportunity Insights to restart items in the CPI basket for accurate display recent price changes.

“The CPI basket must have been reduced [transport], and [then] you get the lowest price calculation in April, ”he said.

The crisis of reform in Europe

Unlike in the US, high inflation rate is set annually in January. The change in the epidemic means that this year’s census will not reduce the cost of goods, such as fuel, hotels and restaurants, which collapsed last year.

Line of Weights chart (out of 1,000), selected items show changes that may not occur in other eurozone trees

As a result, even if European consumers return to the economic crisis, government figures could reduce spending in these areas.

Carsten Brzeski, an economist at ING, said that “interpreting this year’s high inflation rate would not be an easy task” because eradicating the epidemic would lead to disruption not only in the immediate future “but also by the end of this year and [consumers] a return to normal functioning ”.

This means that government inflation figures are “not very accurate”, says Gregory Claeys of Bruegel’s economy. “We will have the same problem last year, but we have changed,” he warned.

The results may be significant. For example, the weight of entertainment and their services as well as restaurants and hotels dropped by 4 and 3 percent respectively in 2021 compared to last year. Over the past 24 years the cost areas have changed by 0.06% per year.

The problem is already evident in the case of petrol: all types of prices and utilities collapsed last year. Oil prices are now rising again, but their ability to account for inflation will be 13% lower than last year – and the results will continue until the euro inflation basket is rectified in January. The same can be said of hotels and movies.

The Eurozone Prices Chart of January 2021, calculated using two different scales (changes in %% per year) show Weight changes have increased the euro's economic growth

European Central Bank counting that the decline in consumer experience last year was 0.2% compared to the average CPI between April and August, as well as weight change this year. pushed for higher prices and 0.3% in January.

Katharina Utermöhl, an economist at Allianz, said policymakers “will need to recognize this and try other measures to better understand how things are going” – as the figures continue to fluctuate with CPI in the coming months.

The issue has been updated after publication to address changes in European scales and increase US prices by 2020.

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