Why are the prices going up?
Prices will generally increase if there is a decrease in supply or an increase in demand. In the current scenario, most economists do not believe that a widespread increase in demand is likely given the weakness of jobs and incomes. Are prices then increasing mainly due to supply disruptions?
The explanations vary according to the categories and remain incomplete.
For example, while local demand for fuel and related items may be low, strong global demand has resulted in higher prices. But other forms of fuel, used locally, have also seen their prices rise, QuantEco Research said in a note Monday.
âFuel inflation showed a strong sequential increase of 2.19% month over month, driven by higher prices for manure cake, firewood and chips, diesel, kerosene and electricity. Most of these items, with the exception of diesel and kerosene, are unrelated to the price of crude oil, âthe note said.
In the food category as well, a confluence of factors is pushing up prices, including higher food costs globally, disruptions experienced locally and, in some cases, higher price mark-ups, economists said. Nomura, Sonal Varma and Aurodeep Nandi in a report.
âWe were forecasting an increase in the prices of protein products (meat and fish, eggs and legumes), vegetables and global price-related categories like sugar and beverages, but the amount of increase in most categories was a surprise on the rise. They wrote. higher. “
Kaushik Das, chief economist at Deutsche Bank, pointed out that the cost of a number of services is also increasing. That, he said, could be the impact of the lockdowns imposed.
For example, the costs of household goods and services rose 2.1% in May, health care costs rose 2.2%, recreation and entertainment costs rose 1.9%, and Education costs rose 0.9%, Das pointed out.