Which G7 Economy Has the Highest Inflation in 2023?

The Group of 7, or G7, is an intergovernmental political and economic forum made up of seven countries – Canada, France, Germany, Italy, Japan, the UK and the USA. The group discuss solutions for major issues affecting the global economy, climate, trade, and security, among other things.

Using research from Statista, we explore how the G7 countries have been affected by rising inflation rates and increases in costs throughout 2023. We look at which countries have had the highest inflation rates, and the lowest, breaking them down to see which areas have been most affected.

The UK has the highest rate of inflation of G7 economies in 2023, at 7.9%. The UK is the only G7 member where the year-over-year inflation rate rose compared to the previous month.

The main contributors to rising inflation in the UK have been food and energy costs. Food especially has been a factor, with inflation rising to nearly 20% in 2023. However, even core inflation – which excludes food and energy costs – has been high throughout the year.

It’s believed that the conflict in Ukraine has been a reason why inflation in the UK has been so high. The conflict meant less oil and gas was available from Russia, which drove up the prices of what was obtainable. There was also much less grain available due to the conflict, which again saw prices rise as demand outstripped demand.

The rising energy costs combined with other factors, such as continuing difficulties following Brexit, and poor weather conditions, meant that the UK saw a shortage of vegetables. Yet again, prices rose for what was available.

Research shows that sugar in the UK saw the biggest increase in price, rising over 59% from 2022 to 2023. Olive oil rose 47% and frozen vegetables rose 23%.

Italy saw the second-highest inflation rate for its economy in 2023, with a 7.6% increase for all items.

Like the UK, this was compounded by food and energy rates, which saw large increases. Italy faced the same issues as many other countries, namely, recovering from the Covid-19 pandemic and dealing with the impact of the conflict in Ukraine. There has also been a degree of political instability in Italy, with a far-right party winning majority votes in a 2022 election.

However, inflation rates slowed over the summer, in part due to warm weather which saw a reduction in the demand for oil and gas. Italy also managed to avoid a “pasta strike” which would have seen individuals encouraged by campaigners to avoid buying pasta in protest to the extortionate rising prices. Over the summer, pasta prices decreased to a more acceptable level, negating the need for the strike.

Germany saw the third-highest inflation in 2023 out of the G7 countries, reaching 6.1% increase across all items.

Like the UK, Germany’s inflation rise was most prominent across food prices, reaching around 15%. The price of dairy products rose 22.3% year-on-year and confectionary products, including sugar, jam and honey, were 19.4% more expensive.

Energy had less of an impact – while still high, the German government gave a €200 billion energy support package to households to help ease rising prices. Efforts were made to diversify energy sources and also reduce energy uses – this, combined with a mild winter, helping to stop energy prices reaching the heights they did in other parts of the world.

France is the G7 country with the fourth-highest inflation in 2023, reaching 5.1% increase across all items.

France saw lower increases across energy prices than the preceding countries, but the second-highest increase in food inflation, second only to the UK. However, in the latter half of the year as food prices began to fall, energy saw a rebound, partly due to the removal of price caps.

It’s thought that while the energy price cap helped to keep inflation low in this area, it cost the government more than €85 billion, amounting to 3.5% of gross domestic product.

The USA saw the fifth highest overall inflation rates out of the G7 countries, with an increase of 4.0% on all items. This is actually lower than the G7 total of 4.6%.

The USA is the first country on the list that saw a decrease in energy prices, reaching around minus 11%. Its thought that is partly due to investor expectations that there will be less demand over the year, as well as rates recovering from high rises in previous years.

Prices for housing and food in the USA are still high and having an impact on the economy.

Canada is the G7 country with the sixth-highest inflation rates in 2023.

Overall, Canada has an increase of 3.4% but saw a decrease in energy prices of around 12%. By the end of the year, rates had fallen to the lowest levels in two years, and more stability is now expected.

Falling energy prices have been thought to be the biggest contributor to the falling rates overall, including lower prices for gasoline. Falling food prices have also helped, with less pressure on the fresh food market.

Japan has the seventh-highest inflation rates out of the G7 countries, with an overall increase of 3.2%.

Like the USA and Canada, Japan saw rises in food prices and other items, but a fall in energy rates in 2023. It’s estimated that 29,106 food items in Japan saw price hikes by October, already exceeding the 2022 total of 25,768. It’s thought that 2023’s total could reach 35,000 food items increased in price by the end of the year.

However, Japan’s economy is now seen to be improving. It’s estimated that Japan inflation rates will fall over the next few years, before plateauing at around 1.6% by 2028.

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