Are we starting to see the wage increase vs inflation increase death spiral?

mcast123 said:
My sister got a 10yr fixed @ <2% three months ago.

Stop reading the proletariat news media, they're always one step behind. Goldman Sachs is usually ahead of the game, they're forecasting a fall in inflation next year.

Disposable income is falling, exactly for the reasons you raise, that has to be deflationary.
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can i ask what the deposit was ? for that rate must have been 40% or more .. and with who ?
 
I'm sure my public sector pay increase this year of a little under 2.5% is helping keep inflation under control, I'll spend the extra £11/month net from this time last year carefully as to not cause any problems to the economy, maybe a pair of thermal socks for around the house. :)
 
mcast123 said:
My sister got a 10yr fixed @ <2% three months ago.
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Rates have increased significantly in the last 3 months though. You won't get a 10yr fix for under 3% today.

mcast123 said:
Stop reading the proletariat news media, they're always one step behind. Goldman Sachs is usually ahead of the game, they're forecasting a fall in inflation next year.
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Yes but that wont necessarily mean prices fall. You need deflation for that. A decrease in inflation is still inflation i.e. price increases.

I would expect inflation to fall next year given its a YoY figure. So if prices increased 10% in Sept then that's based on the same prices from Sept 2021. If it's 2% next Sept than that 2% increase from Sept 2022 but it doesn't negate the fact that prices went up 10% the previous year..
 
^^ this, to actually reverse the effect of inflation you need deflation and no one is projecting that will happen. That means these prices will become 'the new normal'.
 
b0rn2sk8 said:
^^ this, to actually reverse the effect of inflation you need deflation and no one is projecting that will happen. That means these prices will become 'the new normal'.
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Yup and we will need a few years of 3-5% pay rises just to get back to the same standard of living as we had at the start of this year.
 
flea.rider said:
higher prices cause inflation .. goods services food .. energy .. pay is what you ask for after the fact
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Higher prices is inflation. People ask for pay rises for all sorts of reasons. If wage growth outstrips growth in supply it will be inflationary.
 
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Stretch said:
Higher prices is inflation. People ask for pay rises for all sorts of reasons. If wage growth outstrips growth in supply it will be inflationary.
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higher prices is lack of goods or the lack of components to make the goods , oil food energy .... which causes inflation .. if there is a glut on things prices drop ...
 
flea.rider said:
higher prices is lack of goods or the lack of components to make the goods , oil food energy .... which causes inflation .. if there is a glut on things prices drop ...
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Higher prices can be caused in two ways. Either a drop in supply (cost push inflation), or an increase in demand (demand pull inflation). The second one is caused by increased wealth (i.e. increasing wages), trying to purchase a pool goods/services that is unable to grow at the same rates.

Demand pull is fairly typical of what you see at the "overheating" phase of the economic cycle. There is very low rates of unemployment, the economy can't increase the supply of good/services because it's at capacity, and employers start to compete with each other to retain and recruit staff by offering them more money.
 
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Richie said:
Yup and we will need a few years of 3-5% pay rises just to get back to the same standard of living as we had at the start of this year.
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Unless the supply problems can be fixed increasing wages will not solve the problem. It will just create more inflation. Inflation is signal that there is too much money chasing too few goods. What is required is market equilibrium. Without an increase in supply this essentially means it is necessary for some people to be materially poorer.

This is a long term problem created by the pandemic, Brexit and other supply issues. It will take at least a decade to get back to where we were.
 
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Tuppy_Glossop said:
What about all the people that became economically inactive during the Covid lockdowns? Companies are now paying more to get the staff they want, hence wage rises. It isn't all down to inflation.
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That’s very sector dependent. I don’t think we’ve seen huge wage inflation in retail for example despite lots of “great resignation” activity, but tech for example it has contributed to very significant wage inflation.
 
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