Inflation Predictions

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

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

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

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.

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.

Does soon mean this year or within 4 years?

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

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

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.

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.

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.

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.

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

But I agree with much of your fears.

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.

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.

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.

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.

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

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.