Why is there no inflation?

JohnWinder

'As the lockdown bites more and more people face increasing financial hardship and mounting levels of debt.'

https://www.theguardian.com/commentisfree/2021/jan/11/the-guardian-view-on-covids-widening-gaps-the-rich-are-getting-richer

The richer who already couldn't spend all their money have become richer, and the poorer have less to spend. Does that go towards an explanation?

Linton

My take:

1) One cause of inflation is that people have access to more money than needed to buy the goods available.  So they compete by being prepared to pay more to get what they want - consider the housing market.
2) The amount of money people have available to spend in a say a year depends on two things - the amount in circulation and the rate at which it moves from one person to another.
3) The rate at which money moves from one person to another has dropped because of Covid restrictions so if nothing was done eople would earn less and spend less in a year, thus potentially causing deflation.  The government is putting more money into circulation which avoids deflation, ensures that everyone has enough for much the same standard of living as before and that vast areas of the economy dont collapse.

The net effect is that people's ability to spend continues to match the goods available, hence no inflation.  The simplistic view that extra government spending causes inflation is just wrong, reality is more complex than that.

Albermarle

Increased demand for what? 
Things people tend to spend quite a bit of money on include:
Holidays (nope! ) 
Eating out/going to the pub (nah!) 
Petrol (you don't need much for the weekly shop) 
Nice clothes for going out in (are you having a laugh?) 
Smart clothes for work (tracksuit bottoms and an old T-shirt are just fine for WFH) 
Food (obviously still buying that, but there's a natural limit on how much of it I want to buy regardless of how much money I have) 

There are some areas doing unexpectedly well .

One boom area is home improvements , such as new double glazing, conservatories , garden office, extensions etc 

Partly due to an increase in people moving homes but also the increase in home working creating a need for more space.

Plus new housing construction is busy .

The supply chain for many products in this area is very stretched and prices for many related raw materials and products are going up fast . You will notice this soon in the DIY stores and the difficulty in booking any white van man tradesmen.

HansOndabush

Inflation will come, don't fret, probably a lot more than you are happy with. It's how the gov't inflates their debt away and robs the middle class of their savings.

BananaRepublic

JohnWinder said:

'As the lockdown bites more and more people face increasing financial hardship and mounting levels of debt.'

https://www.theguardian.com/commentisfree/2021/jan/11/the-guardian-view-on-covids-widening-gaps-the-rich-are-getting-richer

The richer who already couldn't spend all their money have become richer, and the poorer have less to spend. Does that go towards an explanation?

Indeed. People in hospitality and leisure tend to be low paid, and these are the areas being hit the most. I worked for a company making touchscreens and demand has increased due to increased demand for hospital equipment.

I took up inline skating during the first lockdown, and shops were selling out fast. I got the last pair of a particular model of inline hockey skates from a well known UK shop, and most other models were sold out. I was told they would not receive new stock for six months, and over six months later they still don't have new stock. To their credit that shop did not increase prices. I bought skates from other shops too, and again they were not increasing prices, although special offers had largely disappeared. I suspect there is an element of social responsibility and reputation management, as they are struggling, they know customers are struggling, and they don't want to exploit them.

consciousobservation

BananaRepublic said:

JohnWinder said:

'As the lockdown bites more and more people face increasing financial hardship and mounting levels of debt.'

https://www.theguardian.com/commentisfree/2021/jan/11/the-guardian-view-on-covids-widening-gaps-the-rich-are-getting-richer

The richer who already couldn't spend all their money have become richer, and the poorer have less to spend. Does that go towards an explanation?

I suspect there is an element of social responsibility and reputation management, as they are struggling, they know customers are struggling, and they don't want to exploit them.

I think you are right on social responsibility. Outdoor equipment, building/DIY supplies, bikes, surfing equipment, white goods, these are just some of the areas I have noticed are experiencing substantial supply issues. And this was all before brexit and the reported large increases in the costs of importing.

BananaRepublic

consciousobservation said:

BananaRepublic said:

JohnWinder said:

'As the lockdown bites more and more people face increasing financial hardship and mounting levels of debt.'

https://www.theguardian.com/commentisfree/2021/jan/11/the-guardian-view-on-covids-widening-gaps-the-rich-are-getting-richer

The richer who already couldn't spend all their money have become richer, and the poorer have less to spend. Does that go towards an explanation?

I suspect there is an element of social responsibility and reputation management, as they are struggling, they know customers are struggling, and they don't want to exploit them.

I think you are right on social responsibility. Outdoor equipment, building/DIY supplies, bikes, surfing equipment, white goods, these are just some of the areas I have noticed are experiencing substantial supply issues. And this was all before brexit and the reported large increases in the costs of importing.

I don’t think there are large increases in the costs of importing. Nissan says the extra paperwork is nothing. But there are delays because dear old Parliament and her civil service helpers haven’t yet sorted out the processes, and documentation. And companies had very short notice to prepare as the agreement was reached with only weeks to go. That is the cost of brinkmanship. 

Thrugelmir

consciousobservation said:

BananaRepublic said:

JohnWinder said:

'As the lockdown bites more and more people face increasing financial hardship and mounting levels of debt.'

https://www.theguardian.com/commentisfree/2021/jan/11/the-guardian-view-on-covids-widening-gaps-the-rich-are-getting-richer

The richer who already couldn't spend all their money have become richer, and the poorer have less to spend. Does that go towards an explanation?

I suspect there is an element of social responsibility and reputation management, as they are struggling, they know customers are struggling, and they don't want to exploit them.

 Outdoor equipment, building/DIY supplies, bikes, surfing equipment, white goods, these are just some of the areas I have noticed are experiencing substantial supply issues. 

Shipping containers being in the wrong place aren't helping nor lockdowns. China's output in the first half of 2020 was greatly impacted. Many European manufacturers have struggled as well. As global supply chains broke down. 

happybagger

If people aren't spending because they physically can't, it's hard for anyone to put up prices. Personally, since last March, apart from food and diesel, I've bought four car tyres, some wallpaper and 10 litres of paint.

Hardly going to set the world alight. But when the nonsense is over, I will certainly be making up for it! Lots of stuff I need to do but I'm not messing about with covid rules, so it'll wait.

Flip side of low inflation, just what the government needs  - no interest on savings encourages spending, and low interest rates means their debt pile doesn't worsen too fast

thickasabrick

Don’t suppose there is a UK equivalent of John Williams'  shadowstats to compare the “official” inflation rate against alternatives .
To quote 
“methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living. “