Inflation Predictions

Mickey_James

Are we going to see a big hike in inflation?

Lots of cash thrown about now.

I've already seen it in my local takeaway, prices gone up about 20-25%.

Building materials are rising rapidly pushing up the cost of building - seen mentions of 15%+ increases.

Electric cars being shoved down our throat at massive prices.

Businesses hiking up their prices due to pent up demand (I have a feeling these prices will then stay the same!)

Wanderer78

Mickey_James wrote:

Are we going to see a big hike in inflation?

Looks like we 're heading in the opposite direction, deflation, less money heading into the real economy, more heading into asset markets, hence further inflation there, and government is defaulting as usual, trying to encourage people to spend their savings and to take on debt, while heading into uncertainty, go figure!

Mickey_James

Wanderer78 wrote: »

Looks like we 're heading in the opposite direction, deflation, less money heading into the real economy, more heading into asset markets, hence further inflation there, and government is defaulting as usual, trying to encourage people to spend their savings and to take on debt, while heading into uncertainty, go figure!

Where do you see prices coming down?

Mickey_James

https://www.rte.ie/news/business/2020/1216/1184729-uk-inflation-figures/

Interestingly inflation lower than expected in the UK for November, primarily due to black friday sales it seems.

Can't say I noticed any drops in prices here.

Wouldn't surprise me to see the UK go to negative interest rates.

Poor_old_gill

We're probably seen slight deflation this quarter and should continue to do so into Q1/Q2 next year but I'd imagine by Q4 next year we'll see inflation start to creep up and by 2022 we should see inflation in certain products running at a relatively high rate (6-8%).

All my own opinions obviously

Wanderer78

Mickey_James wrote:

Where do you see prices coming down?

I'm not actually sure I see anything coming down, it's been a horrendous year for businesses, and the banks must be close to pouncing on many of them, the only thing I can think of is oil sector related industries, maybe, but I haven't checked in on that sector in a long time

Geuze

Two discussions:

https://marginalrevolution.com/marginalrevolution/2020/12/i-am-not-so-worried-about-inflation.html



http://econbrowser.com/archives/2020/12/inflation-looming-phillips-curve-vs-quantity-theory

Geuze

https://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexnovember2020/

So far this year:

Prices fall by 1.1% in the year to November 2020



The main factors contributing to the annual change were as follows:

Transport decreased primarily due to a reduction in air fares and lower prices for diesel and petrol. This decrease was partially offset by higher prices for motor cars and an increase in the cost of other services in respect of personal transport equipment.

Clothing & Footwear fell due to sales.

Housing, Water, Electricity, Gas & Other Fuels decreased primarily due to a reduction in the price of home heating oil, lower rents and a fall in the cost of natural gas. This reduction was partially offset by an increase in the cost of electricity and higher mortgage interest repayments.
Furnishings, Household Equipment & Routine Household Maintenance fell mainly due to the reduced cost of non-durable household goods, furniture & furnishings and household textiles. This decrease was partially offset by an increase in the cost of domestic services and household services.

Restaurants & Hotels increased primarily due to higher prices for alcoholic drinks and food consumed in licensed premises, restaurants, cafes etc. This increase was partially offset by a reduction in the cost of hotel accommodation.

Health rose mainly due to an increase in the cost of medical and dental services.

Miscellaneous Goods & Services increased primarily due to higher health insurance premiums and higher prices for hairdressing salons and personal grooming establishments. This increase was partially offset by lower motor insurance premiums, a fall in the price of other personal effects and lower prices for jewellery, clocks and watches.

Recreation & Culture rose mainly due to higher prices for package holidays and an increase in the cost of recreational and sporting services. This increase was partially offset by lower prices for games, toys & hobbies and gardens, plants & flowers.

Zenify

I have a theory about inflation and wanted to see your thoughts on it ?

There are many reasons why we havent seen inflation over the last few years even with negative interest rates. These include globalization, supply chain management, technology advances etc. But could it be that low interest rates themselves keep inflation down as they reduce the costs for financing for business and enabling cheaper costs.

This is a scary thought as many expect to see inflation starting to wake up from its slumber over the next few months. I wonder if we will see the opposite and have difficulty containing inflation. Obviously overall interest rates will have their desired affect but I suspect they will have side affects in the opposite direction too.

Thoughts?

2lazytogetup

i expect inflation to go to double figures soon.

Reason, as the economy opens up, services that were closed will increase prices to compensate.

So for example, bringing your child to a playcentre at the weekend. it used to be 10euro. now the playcentre have increased it to 15euro as they know the demand will be there (people want to do activities) and the playcentre can justify it that they have financially suffered for last year and now its time for their customers to cough up.

Zenify

Does soon mean this year or within 4 years?

Wanderer78

2lazytogetup wrote:

i expect inflation to go to double figures soon.

It could, and it may not, I'm not sure we truly know what causes inflation now, we seem to be in some twilight zone regarding it, everyone's looking for it, but unable to create it, but being in a deflationary period for a prolonged period is not good

Wanderer78

Zenify wrote:

This is a scary thought as many expect to see inflation starting to wake up from its slumber over the next few months. I wonder if we will see the opposite and have difficulty containing inflation. Obviously overall interest rates will have their desired affect but I suspect they will have side affects in the opposite direction too.

I have wondered this myself, and I think your idea is probably as valid as anyone else's idea, I'm wondering also, will inflation all of a sudden appear unexpectedly, and will we be able to contain it, if it does

Zenify

Akesh wrote: »

Inflation is measured poorly and that leads to skewed analysis. In almost every survey, people consider inflation to be 'significantly' higher than what the CPI or PCI say it is.

Covid has made the problem worse as peoples' behaviour has changed significantly but the measurements have not.

What do you predict to be the actual inflation rates for 2021 and the years ahead?

Fred Cryton

Inflation can't happen like it did in the 1970's because of globalization. If a product becomes more expensive, we will just substitute it for another product imported from Greece or China etc. We had no choice in the 70's but to pay the higher price.

Service inflation is more of a problem but is also limited by globalization. We can import services online from abroad. Also free movement of labour will keep wages steady.

Zenify

Fred Cryton wrote: »

Inflation can't happen like it did in the 1970's

OK I think it's important to put a figure on high inflation. The 70s saw inflation rates around 20%. I think high inflation as being 3%. I think 3% will put a pretty big dent into the world markets and asset prices with knock on interest rates.

Geuze

2lazytogetup wrote: »

i expect inflation to go to double figures soon.

I will happily bet against you.

You expect the CPI / HICP to exceed 10% per annum soon.

I will pay you €100 if that happens.

By "soon", I define that as during 2021-2022.

Geuze

Zenify wrote: »

OK I think it's important to put a figure on high inflation. The 70s saw inflation rates around 20%. I think high inflation as being 3%. I think 3% will put a pretty big dent into the world markets and asset prices with knock on interest rates.

Yes.

Although 3% is above the ECB target, if that was due to temporary issues like oil cost spikes, etc., the ECB might well see through it.

Pussyhands

I am very worried about inflation at the moment.

You already see it first hand with supply chains etc. Price of building materials, farming materials, cars etc all going up in price.

Think in the summer when restrictions lift and people go on holiday here, the hotels are going to have massive demand. They will up their prices, to claim they need to make money back.

I don't believe these prices will ever reduce again, once it's possible to get that money once, they'll be able get it again.

I also think the government + EU + USA are supporting inflation because it'll make the debt cheaper to pay. How else could you explain the government raising the HTB grant to 30k? When you think about it, there were two types of people during Covid...those who were put on PUP and those who carried on as normal.

Why would the 30k help anyone any more than the 20k? People who were put on PUP werent allowed to get mortgages so they were out of the picture, so why were people unaffected by covid given more money? To increase prices again.

Geuze

Earlier I said CPI inflation will not go over 10%.

But I agree with much of your fears.

Wanderer78

Pussyhands wrote:

Why would the 30k help anyone any more than the 20k? People who were put on PUP werent allowed to get mortgages so they were out of the picture, so why were people unaffected by covid given more money? To increase prices again.

Most inflation has been going towards assets such as property, for a very long time now, it's clearly failing, and it 'll probably destroy traditional government parties such as ffg, as they have been the parties encouraging this behaviour

An Ri rua

Wanderer78 wrote: »

I have wondered this myself, and I think your idea is probably as valid as anyone else's idea, I'm wondering also, will inflation all of a sudden appear unexpectedly, and will we be able to contain it, if it does

Things tend to appear unexpectedly when they are not being anticipated, accounted for, or measured. e.g. CPI is not inflation. The recent UK figures are a con job.

Wanderer78

An Ri rua wrote:

Things tend to appear unexpectedly when they are not being anticipated, accounted for, or measured. e.g. CPI is not inflation. The recent UK figures are a con job.

Im not concerned about inflation, deflation is currently more concerning

Pussyhands

Wanderer78 wrote: »

Im not concerned about inflation, deflation is currently more concerning

Deflation would be great.

An Ri rua

Wanderer78 wrote: »

Im not concerned about inflation, deflation is currently more concerning

The only deflation will be with regards to the national mood when they realise they're definitely not going abroad on hols this year.

You should be very worried about inflation. As it's here.

Wanderer78

An Ri rua wrote:

You should be very worried about inflation. As it's here.

We 're in a deflationary period, as others have said, this is a perfect opportunity for us to borrow, to stimulate the economy, particularly the private sector

jetfiremuck

Inflation. Look at esb and others raised their prices. price of fuel, carbon tax etc. The signs are all there.

Geuze

Wanderer78 wrote: »

We 're in a deflationary period, as others have said, this is a perfect opportunity for us to borrow, to stimulate the economy, particularly the private sector

In the USA, some are worried about higher inflation that may happen due to an economic boom in 2021 / 2022.

Combine the recovery from COVID with a huge stimulus package by the new Govt.

https://johnhcochrane.blogspot.com/2021/03/inflation-options.html

http://econbrowser.com/archives/2021/03/a-bunch-of-year-ahead-inflation-forecasts



The markets are suggesting the following:

Current pricing for caps and floors shows that the market sees a 30% probability that inflation will be above 3% for the next five years, and a 5% probability that inflation will be below 1%, see chart below. A similar worry about high inflation can be seen in 5-year breakevens, currently trading at 2.5%, the highest level since 2008.



Now, many people won't have any problem with 3% inflation.

Also, in a sense higher inflation is a feature of a recovery, so most people won't have a problem with that.

I suppose since one of the aims of QE is to prevent deflation, and boost inflation to close to 2%, then if that happens, the CB should be okay about it.

Zenify

American companies sounding the alarm over inflation. including big companies like 3M and barbie.

Citing shipping, labour and raw materials, specifically plastic.

First to click gets a fee read. Everyone else will be blocked by a paywall.

US companies sound inflation alarm - https://on.ft.com/3rvackN via @FT

Geuze

Eurostat data today

https://ec.europa.eu/eurostat/documents/2995521/11563063/2-30042021-AP-EN.pdf/f9f54645-c67e-7278-c716-0d1de0072e4d?t=1619708673251


Flash estimate

1.6% estimated.

Up from -0.3% just six months ago.

There are more and more signs of inflation, I think.

Wanderer78

Geuze wrote:

There are more and more signs of inflation, I think.

I'm not overly concerned about inflation, we need some element of it, we need it to be able to stay on top of our debts

Zenify

if it goes up by the same amount in the next six months the world is goosed. 2% inflation is great for our debts, with central banks balancing. 3% inflation means higher interest rates and less borrowing. Our economy is a very high stack of cards being held together by borrowed money. It'll all come crashing down.

Wanderer78

Zenify wrote: »

if it goes up by the same amount in the next six months the world is goosed. 2% inflation is great for our debts, with central banks balancing. 3% inflation means higher interest rates and less borrowing. Our economy is a very high stack of cards being held together by borrowed money. It'll all come crashing down.

if central banks decide its best to raise rates, we truly are screwed, we ll have economies crashing all over the shop, so hopefully they dont decide to go full retard on that one. again, we need to keep ourselves in check, we need a major surge in public borrowing, to get the planet moving, if we default back to private sector borrowing, we truly are screwed, as 08 has shown, its by far the more vulnerable money supply

Geuze

Wanderer78 wrote: »

I'm not overly concerned about inflation, we need some element of it, we need it to be able to stay on top of our debts

I'm not overly worried, no.

If the inflation is a symptom of a strong recovery, great.

However, the price level is already way too high in Ireland.

I am worried that further increases in an already excessive price level will erode our competitiveness.


In France, a GP charges 25, and a medical consultant charges 50.

Or medical / legal / property costs are way too high.

These are mostly microeconomic issues.

Geuze

Wanderer78 wrote: »

again, we need to keep ourselves in check, we need a major surge in public borrowing, to get the planet moving

There has been massive public deficits during 2020 and 2021.

There is huge borrowing happening every week/month.

What you suggest is needed, has happened already.

Geuze

Wanderer78 wrote: »

again, we need to keep ourselves in check, we need a major surge in public borrowing, to get the planet moving, if

You will be happy to hear that during 2020 there was massive public borrowing in Ireland.

https://www.cso.ie/en/releasesandpublications/er/gfsa/governmentfinancestatisticsapril2021/


We ran an 18.4 bn euro GG fiscal deficit.

That is 350 million per week budget deficit, or 50 million per day.

Wanderer78

Geuze wrote: »

I'm not overly worried, no.

If the inflation is a symptom of a strong recovery, great.

However, the price level is already way too high in Ireland.

I am worried that further increases in an already excessive price level will erode our competitiveness.


In France, a GP charges 25, and a medical consultant charges 50.

Or medical / legal / property costs are way too high.

These are mostly microeconomic issues.

Geuze wrote: »

There has been massive public deficits during 2020 and 2021.

There is huge borrowing happening every week/month.

What you suggest is needed, has happened already.

Geuze wrote: »

You will be happy to hear that during 2020 there was massive public borrowing in Ireland.

https://www.cso.ie/en/releasesandpublications/er/gfsa/governmentfinancestatisticsapril2021/


We ran an 18.4 bn euro GG fiscal deficit.

That is 350 million per week budget deficit, or 50 million per day.

....and yes, if we dont keep the bulk of our debts on the public balance sheet, theyll more than likely move out into the private sector, further inflating asset prices, in particular in relation to property, we ve done this, it doesnt work!

and yet again, we have to stop this in built panic over deficits, they are simply the public entity of the money supply, in order to have a growing and expanding economy, we must also have a growing and expanding money supply to do so, i.e. we must have rising debts, but we keep defaulting towards the private sector to do this, resulting in credit fueled booms, and subsequent busts

KyussB

Ireland inflation:

KyussB

Good summary of the state of Europe - worth skimming through in full (looks like it was a liveblog, rather than proper article, though):

Euro-Area Economy Slips Into Double-Dip Recession: GDP Update
The euro-area economy slid into a double-dip recession at the start of the year as strict coronavirus lockdowns across the region kept many businesses shuttered and consumers wary to spend.

Reports from some of its biggest members show how far behind the European Union is in recovering from the pandemic amid a slow vaccine rollout. Output in the 19-nation euro area was down 0.6% in the first quarter and declined at nearly three times that pace in Germany.

In contrast, the U.S. posted annualized growth of 6.4% -- fueled by a rush of household spending.
...
In the meantime, the European Central Bank is maintaining a “significantly” higher pace of bond purchases to shield the region from higher global borrowing costs that are spilling over from the faster U.S. recovery.
...
While a pick-up in vaccinations will allow for a gradual withdrawal of restrictions in the coming months, ECB chief economist Philip Lane has warned that the ensuing rebound doesn’t mean there’s a full recovery yet. Inflation pressures are still too weak for policy makers’ comfort, so monetary stimulus will continue to be needed for a long time to come.
...

https://www.bloomberg.com/news/articles/2021-04-30/french-economy-returned-to-growth-before-new-curbs-gdp-update

Geuze

http://econbrowser.com/archives/2021/05/diverging-fortunes-us-and-euro-area-gdp

Geuze

Inflation forecasts in the USA:

http://econbrowser.com/archives/2021/04/five-year-inflation-breakevens

pearcider

Dismal inflation numbers out of the US - highest monthly inflation since 1981. Who’d have thought we can just print money ad infinitum with no ill effects. The markets will really panic when it goes up again next month. And the month after.

Pussyhands

Biden needs to cool the jets.

Companies struggling to get workers as they're getting great money for not working.

Wanderer78

Pussyhands wrote:

Companies struggling to get workers as they're getting great money for not working.

... Or maybe some inflation may cause some employers to increase pay

'great money', I'd imagine many are still lining up for food banks, even while receiving this money!

Geuze

https://ec.europa.eu/eurostat/documents/2995521/11563155/4-02072021-AP-EN.pdf/fe0a86c1-caca-a4cf-ed56-7640c7f0ca7b?t=1625151901425


This worries me.


Industrial producer prices up by 1.3% in the euro area and by 1.4% in the EU

Up by 9.6% in both the euro area and the EU compared with May 2020

In May 2021, industrial producer prices rose by 1.3% in the euro area and by 1.4% in the EU, compared with April 2021, according to estimates from Eurostat, the statistical office of the European Union.
In April 2021, prices increased by 0.9% in both the euro area and the EU.


In May 2021, compared with May 2020, industrial producer prices increased by 9.6% in both the euro area and the EU


And it's not just energy prices.

greenfield21

Yes it does feel like we're heading into a period of deflation. Some of the data out of China not looking so good.

Zenify

greenfield21 wrote: »

Yes it does feel like we're heading into a period of deflation. Some of the data out of China not looking so good.

Do you mean inflatiom?

Pussyhands

Inflation ramping up. Higher than expected figures out of the UK.

Pussyhands

Interesting looking back at the original predictions late last year!

Inflation has certainly ramped up!

geo88

Getting close to 4.5% in Ireland as well from the looks of it?

greenfield21

I never heard so much talk about inflation in the media lately. I still think it will level of and economy slowing with even more qe 22\23.