Economics Nerd Central/ The Global Inflation Thread

MerchantOfEnnis

Full Member
If I has a business I'd be taking this opportunity to increase my prices and blame it on inflation, even if my costs hadn't go up.

And I wouldn't be the first in Cork to do so
 
Supply shortage in commodities explains only some of it IMO.
As an example, while oil is relatively high, it's still in and around the price it was between about 2011 - 2014, which adjusted for inflation was significantly higher.
Of course they could create blips, but I think there are too many other indicators of a different overall root cause.
House price inflation is a good one:
View attachment 11462



You can see that ahead of the crisis, house price inflation had basically halted, but as things opened back up, it skyrocketed.


As for Stagflation, I believe it's something to do with this:
images
You completely left out supply shortages in labour due to covid.

For industries that shut down or where they experienced a significant downdown, many of these workers either reached retirement age or simply never returned, replacing these takes time and as a result there has been wage pressure and hence resultant inflationary pressures, think truck drivers, port workers.

Also I'm sure a lot of machinery that would have become obsolete over the two years of covid needs to be replaced right now as opposed to a gradual replacement if covid never happened, again putting upward pressure on prices. And just on trade itself the ending of covid or at the very least covid restrictions means the pent up demand created by this means all industries are competing to get their products to market as soon as possible thus container costs, shipping costs have all sky rocketed.

No need to even mention what is happening to food prices due to the Russian Ukraine situation.
 

Meridian

Full Member
Locally I heard today of a building contractor who specialises in one off houses, they have had approximately 50% of their planned jobs cancelled over the last few months
Talk of 30% price rises and who budgets for that ?

Lads in Roadstone in Ovens laughing at how stones etc taken out of the local quarry out the road, management blaming Ukraine for price rises of same
 

How bad boy

Full Member
You completely left out supply shortages in labour due to covid.

For industries that shut down or where they experienced a significant downdown, many of these workers either reached retirement age or simply never returned, replacing these takes time and as a result there has been wage pressure and hence resultant inflationary pressures, think truck drivers, port workers.

Also I'm sure a lot of machinery that would have become obsolete over the two years of covid needs to be replaced right now as opposed to a gradual replacement if covid never happened, again putting upward pressure on prices. And just on trade itself the ending of covid or at the very least covid restrictions means the pent up demand created by this means all industries are competing to get their products to market as soon as possible thus container costs, shipping costs have all sky rocketed.

No need to even mention what is happening to food prices due to the Russian Ukraine situation.
The UK had a 1% drop in labour force participation, but that was 2020-2021, 2021-2022 is broadly static and it's not as low as it was in 2018, so I'm not convinced there's a huge impact on inflation there: https://tradingeconomics.com/united...ngdom averaged 76.78,percent in March of 1983.
Certainly labour force size post brexit would significantly overwhelm that.
It dropped in the US during Covid but has rebounded strongly: https://tradingeconomics.com/united-states/labor-force-participation-rate
Ireland has a higher Labour Force Participation rate vs pre Covid: https://tradingeconomics.com/irelan...62.73 percent from,the second quarter of 2020.

Yes, the migration would be a factor, but it'd be inflationary in some countries, deflationary in others, e.g. the UK losing all of those Polish truck drivers to other locations would mean a deflationary wage pressure in the receiving countries.

Your point about pent up demand is exactly my point, the velocity rate has changed. You increase the velocity with an elevated money supply = inflation + GDP growth, but GDP growth is slowing.

As for Russia-Ukraine, I get that has an impact, but you have the combination of the velocity and activity catching up, raising the relative prices significantly, but we had oil prices higher than current rates (and significantly higher adjusted for inflation) from 2011-2014 without the massive rises in inflation.
Additionally, the inflation pre-dates the Ukraine war, so while it might be making it worse, I really can't see it as a root cause.


Paywalled but I agree a recession is probably coming in some advanced economies
 

How bad boy

Full Member
Looks like interest rates are going up again in the Uk


I think they're right to raise them now, maybe the current burst of inflation is temporary. Or maybe it's not, you'll really only know in 9-12 months time.

By that time, expectations may have shifted and it would be even harder to get inflation back down again.

I think the ECB are making a mistake holding off so long on starting to raise rates. I see little justification for rates to stay that low, but there are some considerable risks building.

Would expect GBP to start gaining again EUR, unless Johnson and his bunch of incompetent sociopaths does something particularly idiotic*. It has been very stable over the past year with a gradual gain, but with an interest rate difference becoming larger, expect that to raise the pound.
That said, some analysts (e.g. ABN Amro 2 days ago) think the BoE are done with rate rises for now, but I don't agree.

*On second thoughts, this is highly likely
 

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