Inflation - when will it stop?

sporina

every time I go to the supermarket, more items have gone up in price.. when will it stop? Fuel prices have come down - so why the constant increase in prices?

kirk.

Some price gouging according to official sources

Can't remember the source atm

rossie1977

When supply outstrips demand

LongfordMB

Problem is wage hikes. Look at teachers getting 10% last year.might feel good but it just feeds through to demand and causes another wave of inflation.

Inflation will stall when pay restraint comes which might be never

jackboy

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

No, inflation is being driven by international factors. There is not much we can do about it. Years of printing vast amounts of money means that money is over valued. Transition from oil to green technologies means no more cheap energy or food. High inflation will now be the norm going forward.

the_amazing_raisin

https://www.boards.ie/discussion/2058291842/inflation-when-will-it-stop

Next recession is when it stops, in theory

Technically a moderate amount of inflation is good, central bank's typically aim for 2% annual inflation and will keep interest rates low when inflation is below target and raise them when it exceeds target

It's a pretty coarse solution, the basic idea is that you make money very easy to access by lowering interest rates so people start spending more. This is turn causes inflation, because why charge €50 when you can charge €60 for something. Then the central bank raises interest rates to make it more expensive to access money and this is turn makes everyone more cautious

Like I said, it's a coarse solution, bit like trying to fix a problem on Mars from Earth, there's a long time between cause and effect

The other undeniable truth is despite all the talk about cost of living crises, there's a lot of money flowing around. Look at the price of houses and cars being sold, or the sales figures for new iPhones or PlayStation 5s. If everyone was being cautious with spending then you'd expect those sales figures to take a hit, but they aren't

This isn't a uniquely Irish problem, and we live in a global economy. And frankly, even though we're considered a rich nation, we're poor in comparison to the collective wealth of nations like the USA

This feeds into prices, if someone from the US will pay $1200 for a new iPhone, then Apple aren't going to be inclined to sell them to the Paddy's for €600

Regarding more commodity type things like food and fuel, well there's a few external factors and internal ones

With fuel, it's worth remembering that the prices of oil and gas that are often seen in the headlines are the spot prices for that fuel. That's literally the price on the market to take the oil or gas in that moment

Energy providers will buy oil and gas on long term contracts, 6 months or more. Because there's a risk for the supplier that the prices will go up and they lose money, there's usually a premium on the long term contracts to insure against this

Energy providers were using the spot prices until about 2022, and then the price went up 1500% and you saw the effects in your bills 😬

Also, recently OPEC decided to cut production of oil by around 1 million barrels per day to inflate the price. Seems they didn't like their profit margins being threatened

Regarding food, I think there's a number of factors. Obviously energy is in play, not just in farming but also in transportation, storage, and processing of the food. Also between bad harvests in Europe and a lot of greenhouses being forced to curtail growing because of energy costs, there's just less of some foods to go around

On top of that, two of the world's biggest producers of fertiliser are currently at war with each other, which has had a slight effect on supply

And again on top of that, I suspect the labour costs in the food industry have shot up. Let's be honest, there's a sort of mythical view of farming being this relaxed in touch with nature type of job, but the truth is that it's back breaking labour for a lot of the year. And food processing plants tend to be even worse

Often those jobs were taken by migrant labourers earning a bit above minimum wages (remember Keeling's flying in a bunch of lads during COVID). I suspect however those lads have realised they can make more money doing anything else and as a result it's more expensive to hire them

And lastly, there's probably a fair amount of good old profiteering going on. Remember when the hospitality VAT rate was dropped to lower prices, and prices went up? The reason some things are so expensive is because people will pay that amount for them, whether they want to or not in some cases

Geuze

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

Teachers did not get a 10% pay increase. That statement is false.

Teachers get the same pay changes as all public servants.

Geuze

https://www.boards.ie/discussion/comment/120462656#Comment_120462656

Here is ECB data on the contribution of rising profit margins to inflation:

https://www.ecb.europa.eu/press/inter/date/2023/html/ecb.in230401~ec65174af7.en.html

Policymakers, long preoccupied with higher pay’s tendency to prompt companies to raise their prices, generating a wage-price spiral, should also be alert to the risks of a so-called profit-price spiral, said Fabio Panetta, an executive board member at the E.C.B. At a conference in Frankfurt last week, he pointed out that in the fourth quarter of last year half of domestic price pressures in the eurozone came from profits, while the other half stemmed from wages.

His concerns have been echoed in recent remarks by the E.C.B.’s president, Christine Lagarde, and the Bank of England governor, Andrew Bailey. Although inflation in Europe has begun to ease from last year’s double-digit peaks, the rates remain far above 2 percent, the target of most central banks.

“There’s a lot of discussion on wage growth,” Mr. Panetta said in an interview this week. “But we are probably paying insufficient attention to the other component of income — that is, profits.”

Profit margins at public companies in the eurozone — measured by net income as a percentage of revenue — averaged 8.5 percent in the year through March, according to Refinitiv, a step down from a recent peak of 8.7 percent in mid-February. Before the pandemic, at the end of 2019, the average margin was 7.2 percent.

Geuze

Look at the contributors to inflation in 2022 below.

The red slice is rising profits.

https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog.230330~00e522ecb5.en.html

Geuze

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

Labour costs in Ireland are in 9th place across the EU, yet our price level is joint-highest.

Labour costs are not the main cause of high prices in Ireland.

Water John

A lot of it is definitely greedflation, at this point. Can't remember which company/sector it was, but their net margin had gone from 5.7% to 11.7%.

kippy

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

Blame the workers. Yep, that's the problem......

walterking

https://www.boards.ie/discussion/comment/120463015#Comment_120463015

A net margin of 5.7% is quite low for most industries. In reality you want to be targeting 10% and happy once its over 8%. If you are at 12%+ you will find competitors will be at your door and that can have long term consequences

In some areas such as high tech the net margins can be astronomical - Apple are in the region of 25% NET profits after every cent of cost.

walterking

https://www.boards.ie/discussion/2058291842/inflation-when-will-it-stop

It is slowing finally. But you will find delayed input costs on manufactured items and immediate increases on fresh food for events such as weather (as we saw in February)

Some prices are starting to fall back. Bread jumped last summer, but fell back a bit. Meats have started to fall a little too. Butter and dairy are seeing some drops, but not milk.

Anything high in sugar content will still see some rises as sugar has jumper 30% in the last 6 months. (weather related)

Fuel has dropped considerably as has container shipping costs and some building materials - wood has dropped back below pre-ukraine prices.

But humans tend to primarily see things that affect them negatively - hence we always notice price rises.

Kyokushin Grappler

https://www.boards.ie/discussion/comment/120463168#Comment_120463168

Bad News always travels faster and further than good news. Plus the govt recently said that this can go on for another 7 years doesn't help.

Yurt2

I've noticed when I see something priced stupidly, be it a pair of running shoes or a packet of biscuits in a Centra, I think twice and leave it on the shelf even though I had come in intending to buy it and I can afford it. Lots of my friends and family are doing the same, and when people in aggregate accross the economy do that, prices will moderate in time.

There is definately a degree of profiteering going on - wage growth is pretty muscular in Ireland and frankly, a lot of businesses in Ireland can't resist lobbing an extra few cent or euro on items as a price discovery mechanism.

I was in Germany recently and I was taken aback at how much cheaper a lot of consumer goods are (wealthy Bavaria as it happens).

Water John

IMF saying inflation will fall to pre pandemic levels

https://www.theguardian.com/business/live/2023/apr/11/interest-rates-pre-covid-levels-imf-world-economy-stock-markets-bitcoin-business-live

ednwireland

thing is prices don't come down. they will stay where they are, well rising with whatever the inflation rate is at the time.

we are coming out of of a very stable price situation with barely any inflation. I think you just need to get used to prices going up.

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120462979#Comment_120462979

Wasn't it 7.5% plus 2% so 9.5%

Also some backdated lump sum also.

At the teacher conference they are looking for more again

Glaceon

https://www.boards.ie/discussion/comment/120464141#Comment_120464141

That’s it. You’d need deflation for prices to go back to where they were and no government wants that.

DownByTheGarden

https://www.boards.ie/discussion/comment/120464793#Comment_120464793

I'll roll the dice and take a bit of deflation at this point :)

sporina

its v frustrating.. and like prices are going up by min 25%.. its not just a few cents

Water John

No deflation, that's a disaster. Just prices to hold and let inflation over time adjust the true cost.

Kyokushin Grappler

https://www.boards.ie/discussion/comment/120464793#Comment_120464793

Considering we pay more for everything here compared to the UK and other EU Countries I wouldn't be upset if deflation happened. This Country has no business being as expensive as it is.

Gael23

Something needs to give with the price of food.

Everything is gone up by a minimum of 20% and often more

Geuze

https://www.boards.ie/discussion/comment/120464766#Comment_120464766

2018 - 2020 PSSA

2018 Jan +1%

2018 Oct + 1%

2019 Sep +1.75%

2020 Oct +2%

2021-2022 Building Momentum agreement

2021 Oct = +1%

2022 Feb = +1% to some groups (local bargaining)

2022 Oct = +1%

As can be seen, due to rising inflation during 2021 to 2023, real wages have been falling in the public service.

Geuze

https://www.boards.ie/discussion/comment/120464766#Comment_120464766

You seem to be referring to the extension of the Building Momentum agreement.

2022 Feb = +3%

2023 Mar = +2%

2023 Oct = +1.5%

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120468109#Comment_120468109

You left some out for some reason

"Under the extension of the Building momentum agreement for 2022-2023, 3% is due from the 2nd of February 2022 with a further 2% in March 2023 and 1.5% or €750 whichever is greater due on 1 October 2023. These increases are applied to all public service staff"

Real wages have fallen in every sector due to inflation.

Many got no rise at all. Public sector did. And again want more .

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120468134#Comment_120468134

Deleted

howiya

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

Teachers if paid the same as all other public sectors got 4% last year not 10%. Why not look up the figure before posting instead of making up a figure?

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120462899#Comment_120462899

Public sector going on a solo run. Pay rises can't be given on merit. Must be given across the board "just because"

Some of the inflation is self inflicted no doubt but it's the lower paid private sector who are the victims

Geuze

https://www.boards.ie/discussion/comment/120468144#Comment_120468144

https://www.cso.ie/en/releasesandpublications/ep/p-elcq/earningsandlabourcostsq32022finalq42022preliminaryestimates/

Key Findings

• Average weekly earnings were €900.26 in Q4 2022, an increase of 4.2% from €863.70 in Q4 2021.
• Average hourly earnings rose by 5.5% to €27.72 from €26.27 in Q4 2021.
• Average weekly paid hours were 32.5 in Q4 2022, down by 1.2% from the Q4 2021 value of 32.9.
• The job vacancy rate at the end of Q4 2022 was 1.3%, slightly down from 1.4% at the end of Q4 2021 and down from 1.6% at the end of Q3 2022.
• Average hourly other labour costs grew by 38.4% to €4.54 from €3.28 in Q4 2021.
• The highest averages for hourly total labour costs were €50.69 in Information & Communication and €47.36 in Education.
• The lowest averages for hourly total labour costs were €16.95 in Accommodation & Food Services and €23.44 in Arts, Entertainment, Recreation & Other Services.
• The Professional, Scientific & Technical Activities sector had the highest job vacancy rate at 3.1% in Q4 2022, followed by 2.6% in the Financial, Insurance & Real Estate Activities.

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120468191#Comment_120468191

Salary increases based on performance and profitability.

Not just " because"

Banzai600

talking to someone up northern ireland at the weekend, they have the same issue with price hikes. but he said not on the scale of down here - from what they said they've read and are hearing about our plight down here.

We're being shafted at every turn as a consumer on everything. Good aul ireland - make the fast buck, milk everyone for what you can - great ethic.

but then we know ppl who moan about their shopping bills, yet still buy main brands , go to places like rebraned superquinn - spending triple what we do in a month per two ppl. We shop between tesco, dunnes , lidl and aldi for certain items, and go to each one every other week - which means we dont spend our weekends in shops.

we buy a lot of meat in the butchers, probably 90% of it, and its savage how much the prices have gone up. we did have the discussion with both butchers, they say its out of their hands. We want to suppoort both of them, but its coming close to the time whereby we wont be going to a butcher for meat and our neighbours said the same.

we used to use the tesco online shopping but the minimum charge for delievry has gone up - great move tesco - they use hybrid vans ffs, not sure its justified myself.

Nermal

https://www.boards.ie/discussion/comment/120462924#Comment_120462924

Regardless of the source, inflation is always solvable through interest rates. They just aren't nearly high enough.

Water John

Interest rates rises is a very blunt instrument and stifles actual growth.

Wanderer78

enormous amount of profiteering occurring at the moment.....

....might be causing a few issues at the moment....

realitykeeper

The multinationals are the main pillar supporting the Irish economy. What impacts them, impacts us. And the US dollar strength or weakness has a bearing on multinationals here. If the US dollar goes into decline, Ireland is in trouble. (It would be great for the global south). Multinationals would start laying off workers and closing down if the dollar weakens.

That would impact us even more than rising inflation.

The world is slowly de-dollsarizing. That is not good.

Nermal

https://www.boards.ie/discussion/comment/120468484#Comment_120468484

That's the point.

https://www.boards.ie/discussion/comment/120468109#Comment_120468109

As can be seen, due to rising inflation during 2021 to 2023, real wages have been falling in the public service.

Well, duh? What is the point you're trying to make? That's why it's called inflation and why it can be a problem.

If everyone's pay was increased inline with inflation, then it wouldn't be inflation anymore would it?

the_amazing_raisin

https://www.boards.ie/discussion/comment/120471678#Comment_120471678

I've seen articles from the 1970s talking about OPEC trying to untie the oil benchmark from dollars because they were fed up of western inflation eroding their profits

50 years later, the dollar is still king

I'm not saying the dollar will never be displaced as the main reserve currency of the world, but I don't see it happening anytime soon

It is likely going to weaken but that's from a position of being very overvalued to begin with

And what will replace it? Not sure the world is ready to invest in yuan which can be controlled by the Chinese government anytime they want. Maybe the Euro, but the ECB doesn't seem to be willing to provide the same level of credit guarantees that the Fed is, so it's less attractive

And there's also the fact that the USA is still the largest economy in the world and therefore one of the largest consumers and providers. If you buy something from them they're going to want to be paid in dollars, and if you sell to them they're going to pay you in dollars and tell you to f**k off if you want anything else

realitykeeper

https://www.boards.ie/discussion/comment/120482020#Comment_120482020

Asking what will replace the US dollar is a bit like asking what will happen after you die. It doesn`t really matter if we are ready for it or if we want it or not. It will happen either way. Over the past fifty years the purchasing power of the US dollar has been falling and in recent years the FED had interest rates at zero for a long time which is why we are now at the end game. If you look at the decline in the value of the dollar over the last hundred years you will notice a levelling off in it`s decline in recent years because of zero % interest rates. The FED can`t go below zero and that is a problem. Now it is trying to raise interest rates to fight inflation and if it gives up the fight it can only lower rates to zero which won`t be enough to stabilize the US economy. If it goes negative, other problems will arise.

brickster69

https://www.boards.ie/discussion/comment/120482881#Comment_120482881

A good example, another 2 bundles need to be added to the pile to bring it up to date.It's not really that gold has gone up more that the currency is worth less than it was.

Water John

Optimum inflation seem s to be 2/2.5%. Once you extrapolate that over a long period of time, of course currency loses value in relation to commodities. Back to the acre of land, as they don't make it anymore. Price now about €15K. What price was it 90 years ago?

walterking

https://www.boards.ie/discussion/comment/120468224#Comment_120468224

Food inflation in Norther Ireland is quite a bit higher than down here, but because their media is more a UK wide media with little "local" media, the price increases don't make headline news.

I'm in NI quite a bit. I've shopped in Asda for my needs when up there, but would not be bothered to bring anything back "home" as prices are quite similar and on many things are more expensive

Yurt2

https://www.boards.ie/discussion/comment/120471678#Comment_120471678

The world is not de-dollarizing. An institution will hold a basket of currencies. It will typically consist of USD, euro, GBP, CHF, JPY, sometimes Aus dollar/Singapore dollar/Korean won, and in very limited and particular circumstances a sliver RMB. But utterly dominated by USD holdings.

What to all those currencies have in common? They are freely convertible, not subject to capital controls, highly-liquid, highly bankable jump when the US Fed jumps, and duck when the US Fed ducks (and except for the yen for unique reasons). It's broadly called the eurodollar system these days. The dollar is largely hegemonic, but these little brother currencies basically have the same features as it.

Why do you think developing countries maintain dollar pegs? Do you think countries and producers want Lula Kremlin barter tokens that lock them into linear and non-market responsive trade arrangements with a poor country instead of hard currency that they can 1. bank anywhere at will 2. allocate capital as they wish and 3. allowing for stable and predictable trading with whoever they see fit?

We already saw this in the Soviet Union. Developing countries were bounced into barter relationships with the USSR, where they got left wellies, 20 year out of date radios, and Turnips from the Russians in exchange for whatever commodities the Russians wanted. This impoverished the countries that had the misfortune to be locked in a cruel serf relationship with the Soviet Union.

Meanwhile, Russia and other countries in the Eastern bloc were desperate to get their hands on...you guessed it...US dollars.

There is nothing credible out there to replace the dollar system. Not magic autocrat barter monopoly money, not returning to the gold standard and crude mercantilism, not erratic crypto hype coins.

Is this a recent thing or just something that I haven't noticed before. My virgin media contract is up next month so I'm pre-emptively shopping around for deals because no way I'm paying €70 a month for just broadband.

eir's website it says they increase the price every April by CPI + 3%. This seems ridiculous. I doubt the phone lines and backend equipment are demanding yearly pay rises and even the energy excuse doesn't really wash with me because such a large company would have a special deal with an energy provider and pay much less, than us average consumers.

Glaceon

https://www.boards.ie/discussion/comment/120493966#Comment_120493966

They do it in the UK too, an example of "greedflation" if there ever was one. It effectively locks you into switching every year if you have one of these providers. Digiweb don't do the annual increases, at least not yet.

https://www.boards.ie/discussion/comment/120494169#Comment_120494169

Another example of why important infrastructure such as in this case telecoms, which is vital to society should never have been sold off to the vultures in private firms.

BoxcarWilliam99

https://www.boards.ie/discussion/comment/120493966#Comment_120493966

And when these companies that control vital infrastructure fail they get bailed out with tax payers money .

PokeHerKing

https://www.boards.ie/discussion/comment/120504425#Comment_120504425

If they were publicly run there'd be mucho waste of tax payers money as well.

So either way you'd be getting robbed.