Is inflation becoming sticky?

Workerdrone

Albermarle said:

Workerdrone said:

Altior said:

Universidad said:

Malthusian said:

"Quiet quitting" means "fulfilling your job description to the letter and no more, not doing unpaid overtime, etc". (Not "going on the dole".)

Yes, I don't think benefits claimants are that much of a problem, as I say.

But I do think the fact that work is less and less rewarding is a problem, especially when there's a huge cultural momentum suggesting that hard work pays off.

The expectation of extra work from employers has, in my experience, increased dramatically in the last 15 years. There's always the suggestion of jam tomorrow, and I think many younger folks have figured out that working harder just won't bring you jam.

Malthusian said:

For many baby boomers, what we now called "quiet quitting" was compulsory. If you went over and above you got in trouble with the union.

I have never seen that argument made by anyone from that generation before, but it's a really good point!

If people are hungry enough they will work.

It was as certain as Thursday is tomorrow that furlough would give a proportion of people a taste of being sustained relatively comfortably, free of effort from themselves. It wouldn't be a choice for me, but for others it's their ambition to go through life off the backs of others. 

Work is not mean to be rewarding, it is meant to be fundamentally essential (as a default). A developed society takes care of people who can't work. Not those who simply don't feel like it, or allow themselves to become physically incapable. And with the development of technology, there are very very few people of working age who literally can't work.  

So doubtless, I'm going to come across as a heartless !!!!!!.

Im not going to get into the benefits/furlough/don't work don't eat discussion. I take another slant on the whole thing. Ive been lucky enough to be fairly insulated from recession up until now. I'm 47, this is the first time in my life I've properly had to deal with a recession on my own two feet. I was living at homes a teen in the early 90's and saw how worrying that was (Parents had a building firm), there was still food etc, but the atmosphere of stress stayed with me.

I was recovering from a messy divorce which wiped me out financially in 2007/2008 so moved back home and was just working temp jobs. I'd already lost the house and savings, I didn't have any skin in the game to worry about the GFC.

That said, the experiences of knowing how things can go pear shaped and watching others overstretch themselves made me very much a scrimper and saver, a person who roots out the best deal and automatically stress tests their position.

I was already worried about the amount of QE back in 2016. I was expecting inflation to kick in, yet it never did until post COVID.

So I am sat here on a 10 year fixed offset at 2.75% with a float of 30k in it. 34% LTV, various other assets, two cars, a caravan, no credit card debt, no other loans, I salary sacrifice myself down the the equivalent net earnings of £21.5k and put £1450 a month into pension (including er) the Mrs earns just under £40k with enhancements, she has a db and a small private pension we top up monthly. Monthly savings are around £911 which is used to top up various pots for clothes, Christmas, household, holiday, car repair, car replacement etc.

We each leave ourselves with £300 personal spending money a month.

For me, inflation feels like an annoyance rather than something to worry about. My food shop and a few other bills have gone up, but I've just upped the organisational skills and cook more efficiently with what Aldi sells.

So yes, I probably come across as a heartless !!!!!! and smug to boot. But frankly, I chose to put myself in this position and others chose to put themselves in their position. We have so many layers of insulation and contingency that if inflation/recession becomes a worry for us, it means its armageddon for others.

Its not the inflation which bothers me, Its the fact there's still too much money sloshing around post covid. You can see that in the restaurants, the bars, the airport departure lounge. We have this perfect storm of people with excess savings, sitting on fixed rate deals.

That could well describe me but for one factor, Im not prepared to pay the inflated prices for luxury goods, they are.

I feel increasing the base rate isn't the right remedy. People are still going to splash that excess cash and drive up prices whilst protected by their fixed rates. One day that rate is going to end and they'll have sleepwalked into a serious problem. At that point, the economic merry go round comes to an abrupt stop.

I'd much rather see the VAT rate being increased used to more directly temper consumer spending.

It used to be the wisdom that rises in house prices brought a ' feel rich' factor to many people, and encouraged them to spend more freely.
Maybe a significant drop along with rising mortgage payments, would undermine confidence and put a stop to the scenario about too much money sloshing around that you describe. Especially if there are a lot of doom laden headlines about negative equity.

Perhaps so, but I won't be loosening the money tap until travel agents etc are desperate with their deals due to excess money drying up.

Ebeneezer9

Workerdrone 

See, I told you... heartless... or possibly just the last of a dying breed. Old school.

I’m often referred to as “ old school “ by younger work colleagues, I can only presume this is because I believe in actually working and producing results for the seven hours per day I am paid for, think for myself, finish one task then immediately start another, assist fellow workers and take pride in my work.  I’m currently advising my apprentices on the merits of our shared cost salary sacrifice scheme, I probably get on their nerves but hopefully some of them will listen.  

westv

Altior said:

Work is not mean to be rewarding, it is meant to be fundamentally essential (as a default). 

I don't agree. In a perfect world everybody would be able to find work that was rewarding. The fact that they aren't doesn't mean it shouldn't be a goal - even if unachievable now.
Nor is all work essential. If I eat out is the work done by the waiter and chef essential? It would be enjoyable for me but is it essential?

michaels

MACKEM99 said:

UK inflation to fall to 2.9% by the end of the year, says Jeremy Hunt

Inflation in the UK will fall to 2.9 per cent by the end of 2023, Jeremy Hunt said in his Budget announcement on Wednesday, 15 March.

According to the Office for Budget Responsibility, average rate of price rises was expected to be 7.4 per cent for this year.

However, the pace of price rises is now expected to slow by more than previously predicted.

It comes after surging energy bills sent the UK’s annual inflation rate to 11.1 per cent - a 41-year-high - in November 2022.

Strange isn't it. Even 4 months ago, it was not unbelievable that because the commodity prices that had pushed up inflation had gone into reverse, we would basically see inflation fall right back, pretty much without any other intervention.

Then reality reared its ugly head. 
1) Brexit had done what (this supporter) intended and given workers back bargaining power due to cutting off the labour supply of skilled but happy with low pay Eastern Europeans
2) Simultaneously middle aged workers had tasted furlough and decided that the trade off between work (and spend) and free time was perhaps more towards free time and they took early retirement and reduced hour working in their droves.  This was supported by asset price inflation that made it seem that such choices were affordable.
3) A third group had worse health, directly through long covid or as a result of mental health problems exacerbated by covid or health issues not managed due to covid and thus were also removed from the workforce

So a major hit to the supply of labour met

A major boost in demand
1) Covid injections into the economy to cover those who were not producing output but still needed an income
2) A huge stockpile of involuntary savings, all those new cars, kitchens and extensions and holidays that could not happen due to covid
3) The wealth effect mentioned above, asset prices having inflated when the covid money found a home in assets because it could not be spent

Given where we are in the electoral cycle, fiscal policy remains expansionary leaving the heavy lifting on taking demand out off the economy with monetary policy but this tool is blunted by:
1) Many fewer are borrowers where the rate is closely linked to the BoE rate, the housing market has shifted to less Owner occupied and many of those who are are mortgage free.  Other credit such as credit cards, car loans, mobile phone packages etc are priced for risk and marketing purposes not related to the base rate.
2) Even where there are mortgages, reduced competition on 'standard variable rates' means most are on 2 or 5 year fixes meaning rate rises take longer to impact on the market
3) Money illusion amongst savers - real interest rates are down but I suspect many still see their increased interest earnings as being an income boost that supports higher spending

So wage push inflation meets robust demand that is minimally impacted in the short term by interest rates.  No wonder the March 'inflationary blip ending' scenario was wrong with 2020 hindsight.

arnoldy

It does not help inflation when the Government is incontinent with tax payers money. Every so often another £s hundreds lands in various bank accounts under the guise of "cost of living payments". You know when this happens because the online line delivery vans go into overdrive with people buying lots of stuff they dont need and driving up inflation with all the spending. 

Albermarle

michaels said:

MACKEM99 said:

UK inflation to fall to 2.9% by the end of the year, says Jeremy Hunt

Inflation in the UK will fall to 2.9 per cent by the end of 2023, Jeremy Hunt said in his Budget announcement on Wednesday, 15 March.

According to the Office for Budget Responsibility, average rate of price rises was expected to be 7.4 per cent for this year.

However, the pace of price rises is now expected to slow by more than previously predicted.

It comes after surging energy bills sent the UK’s annual inflation rate to 11.1 per cent - a 41-year-high - in November 2022.

Strange isn't it. Even 4 months ago, it was not unbelievable that because the commodity prices that had pushed up inflation had gone into reverse, we would basically see inflation fall right back, pretty much without any other intervention.

Then reality reared its ugly head. 
1) Brexit had done what (this supporter) intended and given workers back bargaining power due to cutting off the labour supply of skilled but happy with low pay Eastern Europeans
2) Simultaneously middle aged workers had tasted furlough and decided that the trade off between work (and spend) and free time was perhaps more towards free time and they took early retirement and reduced hour working in their droves.  This was supported by asset price inflation that made it seem that such choices were affordable.
3) A third group had worse health, directly through long covid or as a result of mental health problems exacerbated by covid or health issues not managed due to covid and thus were also removed from the workforce

So a major hit to the supply of labour met

A major boost in demand
1) Covid injections into the economy to cover those who were not producing output but still needed an income
2) A huge stockpile of involuntary savings, all those new cars, kitchens and extensions and holidays that could not happen due to covid
3) The wealth effect mentioned above, asset prices having inflated when the covid money found a home in assets because it could not be spent

Given where we are in the electoral cycle, fiscal policy remains expansionary leaving the heavy lifting on taking demand out off the economy with monetary policy but this tool is blunted by:
1) Many fewer are borrowers where the rate is closely linked to the BoE rate, the housing market has shifted to less Owner occupied and many of those who are are mortgage free.  Other credit such as credit cards, car loans, mobile phone packages etc are priced for risk and marketing purposes not related to the base rate.
2) Even where there are mortgages, reduced competition on 'standard variable rates' means most are on 2 or 5 year fixes meaning rate rises take longer to impact on the market
3) Money illusion amongst savers - real interest rates are down but I suspect many still see their increased interest earnings as being an income boost that supports higher spending

So wage push inflation meets robust demand that is minimally impacted in the short term by interest rates.  No wonder the March 'inflationary blip ending' scenario was wrong with 2020 hindsight.

Good summary, but you  missed one point maybe about the effect of increased borrowing costs
More people are renting and rents are going up significantly, at least partly due to increased landlord costs.
This will be directly reducing disposable income amongst many renters. 

Pat38493

michaels said:

Then reality reared its ugly head. 
1) Brexit had done what (this supporter) intended and given workers back bargaining power due to cutting off the labour supply of skilled but happy with low pay Eastern Europeans

In the late 2021 budget then chancellor one Rishi Sunak announced that inflation was worrying as it would probably hit 4% in 2022!

Also - being able to negotiate higher wages is meaningless if inflation is running higher or other related (and possibly causal) negative factors means that your actual standard of living resulting form the higher wages doesn't exist.  Not to mention, plenty of other countries which didn't have Brexit have massive strikes going on right now due to high inflation.

michaels

Albermarle said:

michaels said:

MACKEM99 said:

UK inflation to fall to 2.9% by the end of the year, says Jeremy Hunt

Inflation in the UK will fall to 2.9 per cent by the end of 2023, Jeremy Hunt said in his Budget announcement on Wednesday, 15 March.

According to the Office for Budget Responsibility, average rate of price rises was expected to be 7.4 per cent for this year.

However, the pace of price rises is now expected to slow by more than previously predicted.

It comes after surging energy bills sent the UK’s annual inflation rate to 11.1 per cent - a 41-year-high - in November 2022.

Strange isn't it. Even 4 months ago, it was not unbelievable that because the commodity prices that had pushed up inflation had gone into reverse, we would basically see inflation fall right back, pretty much without any other intervention.

Then reality reared its ugly head. 
1) Brexit had done what (this supporter) intended and given workers back bargaining power due to cutting off the labour supply of skilled but happy with low pay Eastern Europeans
2) Simultaneously middle aged workers had tasted furlough and decided that the trade off between work (and spend) and free time was perhaps more towards free time and they took early retirement and reduced hour working in their droves.  This was supported by asset price inflation that made it seem that such choices were affordable.
3) A third group had worse health, directly through long covid or as a result of mental health problems exacerbated by covid or health issues not managed due to covid and thus were also removed from the workforce

So a major hit to the supply of labour met

A major boost in demand
1) Covid injections into the economy to cover those who were not producing output but still needed an income
2) A huge stockpile of involuntary savings, all those new cars, kitchens and extensions and holidays that could not happen due to covid
3) The wealth effect mentioned above, asset prices having inflated when the covid money found a home in assets because it could not be spent

Given where we are in the electoral cycle, fiscal policy remains expansionary leaving the heavy lifting on taking demand out off the economy with monetary policy but this tool is blunted by:
1) Many fewer are borrowers where the rate is closely linked to the BoE rate, the housing market has shifted to less Owner occupied and many of those who are are mortgage free.  Other credit such as credit cards, car loans, mobile phone packages etc are priced for risk and marketing purposes not related to the base rate.
2) Even where there are mortgages, reduced competition on 'standard variable rates' means most are on 2 or 5 year fixes meaning rate rises take longer to impact on the market
3) Money illusion amongst savers - real interest rates are down but I suspect many still see their increased interest earnings as being an income boost that supports higher spending

So wage push inflation meets robust demand that is minimally impacted in the short term by interest rates.  No wonder the March 'inflationary blip ending' scenario was wrong with 2020 hindsight.

Good summary, but you  missed one point maybe about the effect of increased borrowing costs
More people are renting and rents are going up significantly, at least partly due to increased landlord costs.
This will be directly reducing disposable income amongst many renters. 

Agree rents are going up but I think this is driven by supply vs demand, sure interest rates are one factor but on the supply side but there are many other reasons landlords are dropping out of the market and sales to OOs tend to reduce people per property.  At the end of the day landlords will charge what they can get which will not necessarily mean they can maintain their margins when costs increase (just as rents did not fall when interest rates went down)

m_c_s

There are now signs emerging that interest rates raises are beginning to hit the wider economy. House building has plunged to levels last seen in the 2009/10 (except during extreme lockdown in April 2020). And the overall construction sector is entering a renewed downturn with the UK construction activity index dropping significantly in June. Definitely house builders can see a storm coming and a severe pull back in demand.

Albermarle

michaels said:

Albermarle said:

michaels said:

MACKEM99 said:

UK inflation to fall to 2.9% by the end of the year, says Jeremy Hunt

Inflation in the UK will fall to 2.9 per cent by the end of 2023, Jeremy Hunt said in his Budget announcement on Wednesday, 15 March.

According to the Office for Budget Responsibility, average rate of price rises was expected to be 7.4 per cent for this year.

However, the pace of price rises is now expected to slow by more than previously predicted.

It comes after surging energy bills sent the UK’s annual inflation rate to 11.1 per cent - a 41-year-high - in November 2022.

Strange isn't it. Even 4 months ago, it was not unbelievable that because the commodity prices that had pushed up inflation had gone into reverse, we would basically see inflation fall right back, pretty much without any other intervention.

Then reality reared its ugly head. 
1) Brexit had done what (this supporter) intended and given workers back bargaining power due to cutting off the labour supply of skilled but happy with low pay Eastern Europeans
2) Simultaneously middle aged workers had tasted furlough and decided that the trade off between work (and spend) and free time was perhaps more towards free time and they took early retirement and reduced hour working in their droves.  This was supported by asset price inflation that made it seem that such choices were affordable.
3) A third group had worse health, directly through long covid or as a result of mental health problems exacerbated by covid or health issues not managed due to covid and thus were also removed from the workforce

So a major hit to the supply of labour met

A major boost in demand
1) Covid injections into the economy to cover those who were not producing output but still needed an income
2) A huge stockpile of involuntary savings, all those new cars, kitchens and extensions and holidays that could not happen due to covid
3) The wealth effect mentioned above, asset prices having inflated when the covid money found a home in assets because it could not be spent

Given where we are in the electoral cycle, fiscal policy remains expansionary leaving the heavy lifting on taking demand out off the economy with monetary policy but this tool is blunted by:
1) Many fewer are borrowers where the rate is closely linked to the BoE rate, the housing market has shifted to less Owner occupied and many of those who are are mortgage free.  Other credit such as credit cards, car loans, mobile phone packages etc are priced for risk and marketing purposes not related to the base rate.
2) Even where there are mortgages, reduced competition on 'standard variable rates' means most are on 2 or 5 year fixes meaning rate rises take longer to impact on the market
3) Money illusion amongst savers - real interest rates are down but I suspect many still see their increased interest earnings as being an income boost that supports higher spending

So wage push inflation meets robust demand that is minimally impacted in the short term by interest rates.  No wonder the March 'inflationary blip ending' scenario was wrong with 2020 hindsight.

Good summary, but you  missed one point maybe about the effect of increased borrowing costs
More people are renting and rents are going up significantly, at least partly due to increased landlord costs.
This will be directly reducing disposable income amongst many renters. 

Agree rents are going up but I think this is driven by supply vs demand, sure interest rates are one factor but on the supply side but there are many other reasons landlords are dropping out of the market and sales to OOs tend to reduce people per property.  At the end of the day landlords will charge what they can get which will not necessarily mean they can maintain their margins when costs increase (just as rents did not fall when interest rates went down)

Whether it is supply or demand, or interest rates or both, the end result is the same. Renters will have less to spend on other things.