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Inflation Set For New High As Pay Slumps

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http://www.telegraph.co.uk/finance/jobs/8247910/Inflation-set-for-new-high-as-pay-slumps.html

Inflation set for new high as pay slumps

Inflation is now running at three times the rate of public and private sector pay increases exposing an increasing real-terms pay slump which is threatening to derail the recovery.

New data has revealed that employees are suffering painful real-term pay cuts as salary increases fail to keep up with the rate at which prices are rising, according to the take home pay indices to be published by the payments processor VocaLink.

Both public and private wage growth nose-dived in the three months to December to an annual rate of 1.1pc, figures to be published this week show.

Meanwhile the official rate of inflation, the consumer price index (CPI), hit 3.3pc in November – three times that rate of increase – and is expected to have remained on an upward path since then.

Rising prices are affecting companies' profitability, putting pressure on them to cut costs and avoid wage increases, said Marion King, chief executive VocaLink. "It's double bad news for consumers because not only is there a real drop in take-home pay, inflation is going up at the same time," she said. "I don't think it bodes well for the economy."

Prices are being pushed up by the growing cost of commodities, such as oil and food, as global demand recovers, as well as the feed-through effect of this month's VAT increase.

However, the tough jobs market means that employees have little leverage to demand pay rises, preventing earnings from keeping up with the inflation rate and squeezing people's spending power.

The indexes, which are based on the take home pay going in to bank accounts, showed that the growth rate for earnings in the private sector fell from November's 1.7pc rate to 1.1pc, the lowest level since July.

Manufacturing workers fared worse than those at services businesses, with pay growth in the two sectors ending the year at 0.4pc and 1.2pc respectively.

The dramatic dip in the figure for wages at factories could have been due to disruption to business caused by bad weather making the usual end of year slowdown even worse.

Public sector wage growth, which had settled at a recent peak of 1.3pc for the past four months, also dipped to 1.1pc, the lowest level since June.

That was less of a surprise, given the widespread pay freezes across the sector as austerity efforts get under way.

The situation for pay looks set to worsen, as the Bank of England's central projection is for inflation to peak at 3.6pc as the increase in VAT filters into prices.

I'd like to see the VI's spin this as 'house prices can only go up' ... maybe I'll go and check the express website. They'll probably have a article along the lines of "people suppliment falling wages with BTL income" :blink::blink:

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We count ourselves lucky that we have a Bank Of England that vows to remain vigilant as a way to control inflation. :lol::lol::lol::lol:

Seriously though folks, if wages do not rise people will stop buying as much stuff and prices will have to come down. Also, the commodity bubble has not got much longer before it bursts. China must correct soon and demand will be tempered as a matter of course.

BUT--in the meantime Merv can only remain vigilant as even the slightest rise in IR will push the housing market right over the edge into a deep abyss. Yay!!

If the muppets meet this coming Thursday watch for that "v" word to appear again.

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http://www.telegraph.co.uk/finance/jobs/8247910/Inflation-set-for-new-high-as-pay-slumps.html

Inflation set for new high as pay slumps

Inflation is now running at three times the rate of public and private sector pay increases exposing an increasing real-terms pay slump which is threatening to derail the recovery.

How is this helping reduce the debt payments on my house? People were telling me inflation was going to be my saviour with a strong consensus that this would be good news..

I am a debt deflationist and printing in the face of resource shortages and a growing world population was never going to end well. I would estimate (no point looking at official stats) we are back into the 10% year on year inflation rate seen in 08. We need some 08 medicine and we need it quick.

Edited by Confounded

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My mate who works for Coral tells me that the staff have all been told there's no pay rise this year. That's three years in a row.

He's a bright lad, but hardly Einstein, and tellingly he went on to say something along the lines of "with everything going up it's like getting a pay cut each year".

The great British public is grasping this now, though I still don't think they correlate low interest rates with inflation. Maybe they never will, and of course they've been placated by the reassurance of their homes going up to provide a pseudo wage.

I honestly don't know how Joe Public is keeping his head above water these days.

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I honestly don't know how Joe Public is keeping his head above water these days.

Almost everybody I know has some work on the side which they do not declare. The guy who sits opposite me smuggles gold out of Spain as he goes there every 3 months.

The person sitting to my left moonlights as a payroller.

All of it undeclared.

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I honestly don't know how Joe Public is keeping his head above water these days.

Micawberistic innit?

Maybe last year the average person had 4% of their income to spend on 'tat' and takeaways....this coming year they'll have to cut back.

Maybe we're moving back to a world where the majority just subsist whereas the rich live.

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Of course as real incomes fall, the theoretical house price value to real take home earnngs is increasing at constant house prices.

Another reason as to why you don't necessarily need interest rates to rise for house prices to 'soften/flatten/crash/oh my god it's armageddon out there' (delete as appropriate).

you missed out soar, very naughty of you, shows an inherent bias

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Seriously though folks, if wages do not rise people will stop buying as much stuff and prices will have to come down. Also, the commodity bubble has not got much longer before it bursts. China must correct soon and demand will be tempered as a matter of course.

Yep, if food gets expensive we'll simply stop eating. That'll show them! And if heating oil gets too expensive we'll just freeze in unheated homes to make a point to the greedy heating oil companies. And of course we'll all give up driving as a protest against high petrol prices at the pumps :rolleyes:

Yet again a deflationist ignores that fact that suppliers don't supply at a loss, that lots of things aren't discretionary and of course forgets about that when you print lots of money, there's strong inflationary pressure irrespective of demand.

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Public sector...they can have no rise, yet get about 2-5% more pay.

Its called pay scales...they move up them automatically.

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Public sector...they can have no rise, yet get about 2-5% more pay.

Its called pay scales...they move up them automatically.

Reached the top of my pay scale several years ago, no increase last year or next year. The year before that it was 2%. Mrs. Miyagi (private sector) no pay increase for the last three years, although she got a promotion recently which meant an increase.

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Reached the top of my pay scale several years ago, no increase last year or next year. The year before that it was 2%. Mrs. Miyagi (private sector) no pay increase for the last three years, although she got a promotion recently which meant an increase.

Mrs Loo ( private sector) no rise for last two years...boss...new car EVERY year....and we arent talking a Ford Modeo!!

Now theyve changed her hours and assured her that she wont get called in....the new system takes that cover for sickness etc into account....now its been 4 times she's been called in...I dont know why she agrees to do it, but there you are, us oldies have a sense of pride in the work.

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The guy who sits opposite me smuggles gold out of Spain as he goes there every 3 months.

Smuggles gold? Out of Spain?

Have I missed something? Is there gold lying around on Spanish streets that the locals ignore? Or a prohibitive Gold tax in the UK that Spain doesn't have?

Or are we talking about other substances ?

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We count ourselves lucky that we have a Bank Of England that vows to remain vigilant as a way to control inflation. :lol::lol::lol::lol:

Seriously though folks, if wages do not rise people will stop buying as much stuff and prices will have to come down. Also, the commodity bubble has not got much longer before it bursts. China must correct soon and demand will be tempered as a matter of course.

BUT--in the meantime Merv can only remain vigilant as even the slightest rise in IR will push the housing market right over the edge into a deep abyss. Yay!!

If the muppets meet this coming Thursday watch for that "v" word to appear again.

vagilant?

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Smuggles gold? Out of Spain?

Have I missed something? Is there gold lying around on Spanish streets that the locals ignore? Or a prohibitive Gold tax in the UK that Spain doesn't have?

Or are we talking about other substances ?

Gold as in Au - atomic number 79.

He also smuggles huge quantities of cigs (from Andorra) on his way home and sells them to others who sell them on the streets.

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And don't forget those who have accepted reduced hours / part time jobs and its effects on net household income.

Edited by lufc

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you really need to do better RB, if inflation is high the pound is getting weaker and that means commodity prices priced in pounds will continue to rise. There is no bubble, you've been preaching this crap when gold was £600 an ounce, it's now £900 an ounce

Edited by punter

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Smuggles gold? Out of Spain?

Have I missed something? Is there gold lying around on Spanish streets that the locals ignore? Or a prohibitive Gold tax in the UK that Spain doesn't have?

Or are we talking about other substances ?

Londons Streets are paved in it.

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This is all getting very interesting, or worrying.

Global wage arbitrage is working its magic. Our wages are going down relative to developing nations, until our wages are comparable. That is going to cause big problems, as the tax base of the nation will fall in real terms. We are seeing prices rise quite strongly now, whilst wages for many are stagnant, and the average rise in the private sector is small.

It gets worse. Many benefits are linked to the rate of inflation. That means that to pay for this, either more tax will need to be raised from those in the private sector, or more will need to be borrowed, or a bit of both. If you get benefits moving up relative to private sector income, then more and more people are going to be looking to benefits as a way of life. Many others will choose to work and claim. And the reward/risk equation for working in the black economy will motivate people into that sector.

I am also expecting more people to move back to the UK from Europe, as disasters from their holiday homes force people to return to the UK. They are not likely to be making much of a contribution to the UK economy.

Net result, borrowing is going to increase. All this stuff from the Tories about how they are going to cut the deficit, I just dont see anything from them to achieve this, other than a bit more tax. The key problem facing the nation is the cost of our benefits. The problem is out of control, and likely to get worse as prices rise.

At some point, the bond markets are going to realise that the UK cannot repay the real value of its borrowings. Then we are going to see a proper solution to the budget deficit.

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When it comes to "average pay" calculations where do bonuses figure? Are they included or ignored?

Take the Tesco Annual Report:

"annual bonus payouts ranged from 75% to 95% of maximum reflecting

strong performance during the year against financial and strategic

milestones. The maximum potential bonus was 250% of salary for the

Group CEO, 300% of salary for the US CEO and 200% of salary for

other Executive Directors;"

So last year they got 75% to 95% of their 200% to 300% of salary as a bonus. So what is classed as their salary for "average salary" purposes?

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Net result, borrowing is going to increase. All this stuff from the Tories about how they are going to cut the deficit, I just dont see anything from them to achieve this, other than a bit more tax. The key problem facing the nation is the cost of our benefits. The problem is out of control, and likely to get worse as prices rise.

At some point, the bond markets are going to realise that the UK cannot repay the real value of its borrowings. Then we are going to see a proper solution to the budget deficit.

Completely agree, it's all talk from the Tories and when you do look at the horrendous figures you realise they have no hope with what they have announced. They seem to be hoping for some mega growth coming from somewhere to solve all our woes.

I think the bond market is currently being heavily distracted by the Eurozone disaster, but sooner or later they will have to turn their attentions on both the UK and US.

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But surely it is the excessive pay demands from British workers that drives inflation ?

Or have politcians and their stooges been lying to us for the past 40 years ?

money supply drives inflation.

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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