- The OECD has recently released the consumer price index report for February 2022.
- Consumer prices rose significantly in February in the OECD region.
- A sharp rise in inflation was seen in Turkey among OECD member countries.
While inflation rates have been a worrying issue globally, the Organisation for Economic Cooperation and Development (OECD) nations seem to have faced the worst impact out of all. Inflation has been soaring in the OECD region for some time, with inflation reaching levels unseen in over 30 years in January. Now, the organisation has released the consumer price index data for February 2022.
To the uninitiated, the OECD comprises 38 member nations that share common eco-social problems and work towards resolving them. These nations include Germany, Italy, France, Hungary, the Czech Republic, Poland, Austria, and Slovakia. All these OECD nations are highly dependent on Russia for their gas imports. Most notably, Germany is heavily reliant on the gas pipeline coming from Russia.
What does the latest OECD inflation report suggest?
February has been a month of significant changes for the OECD nations. The year-on-year inflation in the OECD region rose to 7.7% in February 2022, breaking past January’s year-on-year inflation record of 7.2%. The year-on-year inflation was as low as 1.7% just a year back in February 2021.
As per OECD, the increase in inflation reflected in part another sharp rise in inflation in Turkey. According to the Turkish Statistical Institute (TuskStat), inflation in Turkey has increased from 48.7% in January to a massive 54.4% in February. Excluding Turkey, inflation in the OECD region has risen to 6.3%, after remaining at 5.8% in January. In fact, the rise in consumer inflation rate continued in March 2022 in Turkey, where consumer prices increased by 5.46% compared to February 2022.
The Russia-Ukraine war can be blamed for much of the atrocity seen in price levels across the OECD nations. Heavy sanctioning, the disruption of existing supply chains and worsening political ties seem to be driving inflation across most OECD nations.
Food price inflation heating up
OECD further stated that energy prices had contributed greatly to the rise in prices seen across the member countries. As per the report, year-on-year inflation has risen to 5.5% in the OECD area, excluding food and energy.
Additionally, all G7 economies also saw a rise in year-on-year inflation. The largest increases among all G7 nations were recorded in Italy and France by 0.9 and 0.8 percentage points, respectively. The increase in year-on-year inflation was the lowest in Germany, by 0.2 percentage points.
In Canada, Germany, the UK and the US, inflation excluding food and energy was the main driver of overall inflation. However, energy price rises primarily drove inflation in France and Italy.
Other factors pushing prices higher
As the Russian invasion of Ukraine ensued, disturbing claims were made by Russia. One such claim was that Russia would cut the supply of gas to major European countries. Though the move could be equally damaging for Russia, the country made these blunt claims in retaliation to Western sanctioning.
Commodity and fuel prices have largely picked up on weaker market sentiment and delayed shipments. Additionally, financial systems in Russia became handicapped after the country was cut off from the SWIFT platform.
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In fact, the situation has quickly deteriorated in Turkey, with an economic crisis taking shape. Particularly, the post-pandemic economic slowdown has contributed to a large-scale problem in Turkey. Additionally, a series of interest rate cuts have fuelled a price rise instead of promoting investment, exports, and overall growth.