Tuesday, Nov 13, 2007
Weekly pay up 2.9% to £457
ONS: Earnings
The trend in wage inflation is down from 4.6% in 2000 to 2.9% today.
Prices of goods a services are going up (RPI up to 4.2% today)
There will be no wage-price spiral. These price rises will act like an IR rise or tax.
Once housing and stocks begin their secular decline, all the deflationary forces will be in place for a depression by 2011.
Posted by sold 2 rent 1 @ 08:50 AM (595 views) Add Comment
6 Comments
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1. C'mon Correction said...
"There will be on wage-price spiral. These price rises will act like an IR rise or tax". - if prices rise people need to and will want to earn more and will push for more, add paying interest on all the excessive debt people have accumulated over the last ten years and we could/will easily have a price spiral upwards.
I agree we will/could have deflation, but not until house prices are falling sharply and we're in a recession. Until that time I think people are realising they are getting poorer and will need to earn more regardless of immigration.
IMHO - Inflation slowly,steadily upwards leading to Recession and HPC (end of next year) and THEN a deflationary spiral.
2. planning4acrash said...
Unions will not accept RPI above 4% for more than about a year. Wage price cycle to commence this winter with industrial action galore. The PM will realise that trying to supress wages will be more difficult than holding down interest rates and massaging CPI so rates will go up, come what may. IMHO.
3. Jonb said...
If RPI is "only" 4.2%, can someone explain why the price of my shopping basket in Sainsburys has gone up by 40% in the last month. If prices continue to rise at that rate, it is an annual increase of 5569%.
4. cyril said...
Jonb you must be buying the wrong things. You need to buy more vodka, mobile phones and DVDs and less food.
5. sold 2 rent 1 said...
P4C,
You are probably right on the strikes. The unions control is mainly limited to the public sector. With public finances in a mess, we will start to see cutbacks in services. If higher pay deals do go through then unemployment will rise too.
As for private companies, off shoring will continue where employers can't keep a lid on wages.
The rate hiking cycle in the developed countries is pretty much over. Falling real disposable incomes are doing the belt tightening work now.
It has been a pretty pathetic hiking cycle for the Euro zone (4%) and Japan (0.5%). This shows the strength of the deflationary forces at work.
The emerging economies with rocketing wages will have to tighten IRs higher as they have a real inflation problem on their hands.
6. planning4acrash said...
Yer, well, we both differ on rates, I think the rate hiking cycle has at least another year as a result of it being pathetic so far.
My point about public sector pay is that politicians will eventually realise that it will cost them less (particularly when no election til 2010) to increase rates instead of dealing with strikes and having to pay more to public sector workers.