Tuesday 31 August 2021

Inflation Edges Ahead. Or Not

We keep having this debate, don't we?  Raging inflation just around the corner - or merely a knee-jerk reaction based on misinterpreting various straws in the wind?

Well, today we learn that Eurozone CPI has hit 3%, a ten-year high.  Aluminium is way up, along with most of the supply chain for building stuff (notably, 'green' stuff).  Oil has come off its July peak, but natural gas is actually quite scary.

Then again ... we seem set to be importing a whole new wave of cheap labour.  The day that the Unions long for, when the Brexit / Covid labour shortage** really kicks in and transforms the relationship between capital and labour, never quite seems to arrive.

And people are repaying their mortgages.  And CU is away, so we can't even ask him.

Maybe we should have a compo:  UK CPI for December 2021, anybody?



** Earlier this month we did a short west-country tour, during which we patronised 7 establishments (hotels, restaurants).  Didn't hear a single non-Brit voice amongst any of the staff.  Wouldn't have been able to say that three years ago.


Don Cox said...

My guess would be 2.5% annual inflation by Dec 31.

Don Cox

andrew said...

Back in the days when there was less choice and salaries were more similar a single inflation rate was sensible.

This is not true anymore.

It seems that some traditionally blue collar jobs - hgv driver etc - are seeing an increase esp now we cannot import cheap labor.

Other seasonal jobs are just not getting done as if you live in the uk it does not make sense.

I blame a lot if this on blair and brown.
Income tax credits and open borders.

Point behind this all being we live increasingly diverse livestyles and one number is not a good fit for the different things we spend our money on.

dearieme said...

"people are repaying their mortgages": long ago we swapped from a conventional 25 year repayment mortgage to a flexible interest-only mortgage that we finally repaid after 31 years.

It was wonderful: feeling flush - repay a bit with no penalty.

Feeling skint: reborrow a bit with no fee.

At one point we were paying the Building Society a lower rate of interest than it was paying us on an inflation-linked ISA. Them wuz the days.

Will the young things buying now enjoy the same preposterous capital gains we did? (Though, to be fair it's actually our offspring and HM Treasury who will pocket the gains.)

Don Cox said...

The day you pay off the mortgage is one of the best days of your life.

House prices are bound to go up so long as the population grows faster than the number of houses, and the steady influx of colonists will see to that.

Don Cox

jim said...

A spot of inflation might be quite helpful - to Boris and Rishi. How to pluck the goose without it hissing too much is the problem. Had the builders round - much sucking of teeth - cost of this, cost of that, brickies at £250/day. Still, the oldies are rolling in it, best to extract some before they pee it all away in the care home.

As for the outlook, very cloudy. No useful news to be seen, it's mid week and nothing yet for the colour supps and twitters to yatter about. The semiconductor shortage looks like easing - slowly, automation and IT look to be getting rid of more mid range human jobs and there is no sign of an end to coronavirus.

Where is the next 'big thing'. We seem to be in the doldrums, nothing to laugh at but Harry and Megan.

lilith said...

I'm probably asking the wrong contractors but I haven't had a quote for anything that is under £5k: garden fence, downstairs flooring (more like 8k to have wood), a few new windows but not the whole house (6k)....not sure any of it is important enough to spend that kind of money! I think leaving it just as it is and getting out more might be the answer!

lilith said...

Jim, but how we laughed...

Elby the Beserk said...

Meanwhile, this article suggests we are heading for a re-run of the winter of discontent. I'd be inclined to agree

https://archive.vn/eUn1h (archive vn allows you to enter the URL of a paywalled article and you get it for free)

"Beware, Boris: Britain is hurtling towards a winter of discontent
Soaring inflation, spiralling public debt and stroppy trade unions have created the perfect storm"

Elby the Beserk said...

"The latest data shows factory input costs 10 per cent higher than in July 2020, the sharpest rise in a decade, pointing to supply-chain constraints and much more inflation to come."

"Wages soared no less than 7.4 percent between April and June, generating prolonged price pressures as companies pass on costs to consumers"

There's headline inflation, and real day-today inflation, which is clearly ramping up. A government that is beyond financially incontinent can only make that worse.

Jan said...

Inflation is here to stay, probably similar to the 70s as it takes off with a "wage/price spiral" is my guess. As Elby says there's a vast difference between the official rate and what people actually pay for things especially food and energy with council tax about to soar too. The official CPI rate doesn't include anything for housing costs either and if/as interest rates rise so will mortgage costs and rent.

They need inflation to eliminate some of the debt which has built up because of the pandemic; furlough payments etc. I will also go for the official CPI rate at 2.5% for Dec 21 and increasing from there.

Jan said...

For anyone interested in a macroeconomic overview I recommend this:


It's US-centric but applies to the UK too and gives a bit of history to where we are now.