Introduction
It was early morning I stepped out to get some food stuff, there is this shop I always buy foodstuffs because they sell on wholesale, when I got there the shop was partially empty as if they were closing down the business, so I decided to ask the shop owner what is going on, after smiling at me she told me that what I'm seeing in the shop is what her capital can afford that goes and very expensive now.
That is the impact of inflation
Personally before now the quantity of goods I can buy with a certain amount of money have reduced badly and is not getting better.
A brief review on inflation.
Inflation simply means the increase in price of buying goods which can seriously or negatively affect the way consumers and investors buy goods and also invest.
Presently my country have been experiencing high rate of inflation and this are seriously affected the way of living over here.
The rate of inflation determines the rate of effect is going to have on a country, currently most people are thinking of migrating to foreign countries due to the rate of inflation they are currently experiencing.
Inflation in a moderate way has a way of helping the economy but if prices of goods increases beyond what consumers can afford it becomes an issue and affects purchasing power as well as the economy growth.
causes of inflation.
There are so many general causes of inflation, according to statistics covid-19 was a factor that rised the rate of inflation worldwide due to the fact that global supply chain was restricted and also the Russian and Ukraine war also reduced food and energy supply.
The Year 2022 add the highest rate of inflation worldwide it was up to 8.71% and since then it has been high, in the year 2023 it was 6.5% and 2024 have been ranging around 5.8%, after covid-19 a lot of time and resources was needed before the world was able to stabilize a little bit, but the war of Ukraine and Russia has automatically deprived them from producing and supplying food and natural gas which has affected the price of goods and services worldwide.
Inflation was the most worrying topic worldwide as of July 2024, with one third of the respondents choosing that option. Poverty and social inequality as well as crime and violence followed behind.source
Holidays
Before now people travel during summer holiday or end of the year but due to high rate of inflation which has resulted to large increase in all form of transportation many people do not travel for holiday again and this has affected the economy because when people travel for holidays they shop and visit some recreational centers and this was a way of positively increasing economic growth of a country but it's no more again and the profit is not adding up anymore, people are seriously cutting down their expenses to only what they really need.
Infact Share of consumers expected to reduce their Black Friday and Christmas spending due to the increased cost of living in selected European countries in 2022, . In the United Kingdom (UK), for example, roughly four in 10 shoppers said they expected to reduce all of their Black Friday and Christmas spending this year. Only about 30 percent of surveyed UK consumers said they would not cut back on their holiday spending source
Locally another cause of inflation is higher demand of a product, if the demand is higher than the supply this will affect the cost of production and affect economy general and this will result to workers expecting increase of wages for them to survive the future inflation which also contributes to increase of inflation rate.
Government expenditure can also cause inflation, when government spend more than expected during period of economic stimulus this can cause more demands of good and services nearby increasing prices and contributing to inflation.
The financial system also contributes to the cause of inflation because when they increase the interest rate of loans investors who take loans for business will also increase prices of their goods and services so that they can pay the interest as well as make profit from their business and these in effect contributes to the course of inflation.
Another cause of inflation is when raw materials such as agricultural products and oil reduces this can affect production and increase production money and also affect price of product in the market.
Currency depreciation is also a factor to inflection presently some currency have depreciated so much that is affects an increases import and exporting price then consumers purchase will also reduce while production prices increases.
General effect of inflation.
Inflation when high an unpredictable discourages investment and slows down the economy of a country, when the interest of the financial system becomes too high consumers might decide not to take such loans or when they take such loan the prices of goods becomes more expensive and this loss down the economic growth of a country.
As inflation increases consumers and investors loses confidence and trust in the financial system and this results to anxiety and uncertainty.
Inflation have caused social unrest in many regions of both Africa and worldwide and this have led to social instability, it has also cause millions to lose their lives because hospital bills and drugs are very expensive.
Summary.
High rate of inflation is not a good thing at all, it has a big effect on overall financial system, it affects investment by reducing consumer's purchasing power and this results to an unhealthy economy.
All images are mine
Reference
Reference