Supply Chain Crisis Causes Price Hikes at 1 Dollar Shops... "Worsening Expected Next Year" Warning

Heads of Central Banks Worldwide
Concerns Raised at ECB Forum
10-Year Government Bond Yields Rise
Dollar Index Surpasses 94, Highest in 10,000 Days
Won-Dollar Exchange Rate Also Surges

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondents Baek Jong-min and Jang Se-hee] U.S. retailer Dollar Tree announced on the 29th (local time) that it will expand its ‘Dollar Tree Plus’ shelves, which sell items priced above $1, to all its stores. Dollar Tree’s decision attracted attention as it marked a shift from its pricing policy of selling items for $1.

Michael Witynski, CEO of Dollar Tree, said, "We recognize the need to adjust prices in the current economic environment," adding, "We are all witnessing rising costs in wages, transportation, and suppliers."

Dollar Tree saw increased sales during the COVID-19 pandemic but could not avoid a decline in performance amid the burden of soaring logistics costs. Most products sold at Dollar Tree are made in China. With bottlenecks in logistics causing red flags in product supply and soaring maritime logistics costs, it has become difficult to cover logistics expenses by selling items at $1.

◇Central Bank Governors of Various Countries Simultaneously Warn of "Prolonged Supply Chain and Inflation Issues"

This move by Dollar Tree reflects that supply chain problems are leading to rising prices and making it difficult to respond through monetary policy.

At the European Central Bank (ECB) forum held on the same day, central bank governors from the U.S., European Union (EU), United Kingdom, and Japan collectively expressed concerns that inflation would continue to rise due to the collapse of international supply chains.

Jerome Powell, Chair of the U.S. Federal Reserve (Fed), stated, "It is frustrating that supply chain issues have not improved. The situation seems likely to worsen," and estimated, "Inflation will likely continue to rise next year."

[Image source=Reuters Yonhap News]

Christine Lagarde, President of the ECB, also pointed out, "The supply chain bottlenecks experienced over the past few months are continuing and are even worsening in some areas." Andrew Bailey, Governor of the Bank of England, said, "We will closely monitor the rise in inflation."

Haruhiko Kuroda, Governor of the Bank of Japan, said, "Demand is increasing too rapidly, so supply shortages are likely to persist."

The inflation rise caused by supply chain issues is making it difficult for central banks to respond. President Lagarde predicted, "Due to supply chain bottlenecks, soaring energy prices, and the spread of COVID-19, the economic outlook for the Eurozone (19 countries using the euro) remains uncertain."

Governor Bailey emphasized the difficulty of central bank responses by saying, "Monetary policy cannot produce semiconductors or secure truck drivers."

[Image source=Reuters Yonhap News]

A major foreign news outlet reported that the recent rise in inflation is caused by semiconductor supply chain disruptions and shortages of raw materials such as crude oil, deepening the concerns of central banks.

[Image source=Reuters Yonhap News]

◇Dollar Index Hits Highest in a Year... Won-Dollar Exchange Rate Also Surges

The rise in inflation is becoming a trigger in international financial markets. Powell’s remarks on persistent inflation pushed the U.S. 10-year Treasury yield, which had entered the 1.4% range, up to 1.54%. The increase in Treasury yields pushed the dollar index above 94. This is the first time the dollar index has surpassed 94 since September last year. The rise in the dollar index means the value of the dollar has increased.

Following Powell’s remarks, the won-dollar exchange rate opened at 1,188.0 won, up 6.2 won, in the Seoul foreign exchange market on the 30th. As of 10:30 a.m. that day, the won-dollar exchange rate in the Seoul foreign exchange market was 1,185.7 won, up 3.9 won from the previous day. This is the closest it has been to the 1,200 level in 18 months since the closing price on March 19 last year (1,285.70 won).

Jeon Gyu-yeon, a researcher at Hana Financial Investment, told Asia Economy, "Unlike Powell’s initial remarks that inflation was temporary, concerns about its prolongation have been reflected in the market." Meanwhile, the won-dollar exchange rate had already risen to 1,188.5 won the previous day, setting a new high.

This content was produced with the assistance of AI translation services.