Cost of living squeeze in 2022

[speedy_thrills]

xeny said:

leef44 said:

If you introduce such automation won't the workers just strike in protest of the authorities trying to push them out of a job?

If the automation does replace the workers, is the management really going to care if the workers go on strike?

So far tech and automation has not substantially raised per capita productivity which is unfortunate. We, like most industrialised countries, are heading into a scenario where there are fewer workers due to demographic changes so being able to create efficiencies would be very useful. That said because it's across industrialised countries UK businesses won't likely lose out to foreign competition if they raise prices and pay more.

Economic momentum is with workers and will remain with them unless the birthrate or immigration increases very substantially or we push the retirement age back.

[Smiler.]

speedy_thrills said:

So far tech and automation has not substantially raised per capita productivity which is unfortunate. We, like most industrialised countries, are heading into a scenario where there are fewer workers due to demographic changes so being able to create efficiencies would be very useful. That said because it's across industrialised countries UK businesses won't likely lose out to foreign competition if they raise prices and pay more.

Economic momentum is with workers and will remain with them unless the birthrate or immigration increases very substantially or we push the retirement age back.

Which begs the questions, is it likely to & if not, why not?

[loafer123]

oyster said:

Which raises a good point I've been thinking about recently. Even if prices were to slow now and inflation fall back to BoE target by mid 2023 - is that sufficient? Yes, an inflationary spiral will have been avoided, but the impact of the previous inflation would still have ongoing economic effects and would still be removing money from the economy.

Using numbers:
The BoE target is CPI of 2.0%.
In May 2021 (1 year ago) annual inflation was at/near target at 2.1%, when the overall index of CPI was at 111.3.
The current index (May 2022) is at 120.8.
So assume annual inflation drops back to 2.0% by May 2023 (1 year on from latest figures).
The index would have risen to 123.2. Had inflation remained at target from 2021 to 2023 the index would have been at 115.8.

So even if this inflation spike is nipped in the bud now, prices will be permanently higher by 6% than if we had never had the inflation spike. Is this acceptable, or do we need to target inflation at 1% for a few years to 'catch up'?


Another way of looking at it is with petrol prices. They've gone up from 140p ish to 190p ish a litre. If they now only rise by 2% a year for the next few years - is that ok?

If you have debt, the real value of your liability has gone down by 10%, then the economy recovers…happy days.

More interesting might be the deflationary effects of falling energy prices when it all gets sorted out. Prices of goods are unlikely to drop as demand recovers, but input costs could fall hard, so a lot of people may make a lot of margin making stuff.

[steveatesh]

pquinn said:

Some incredibly myopic comments criticising the UK with apparently zero clue about how similarly fked so many other European and G20 economies are. More often than not identical or worse problems with productivity/labour/property/shortages/whatever.

If it was just the UK that would be a problem but when it's all over the place that's a proper problem and beyond the shallow solutions some people think exist.

We are all so fked and narrow little obsessions with particular countries to back your own prejudices really aren't going to help.

I do wish our MSM would acknowledge this point, it needs saying over and over to add context to the U.K. issues.

[speedy_thrills]

Smiler. said:

Which begs the questions, is it likely to & if not, why not?

I'm a believer in technology. The printing press, machine tools, production lines, fertilizers, pesticides etc. all substantially increased per capita productivity and improved the material wellbeing of humanity.

Unfortunately IT hasn't delivered similar gains and that's where most technology investment has been targeted. It looks like we've just not invested in the right technologies over recent decades perhaps?

[Smiler.]

speedy_thrills said:

Smiler. said:

Which begs the questions, is it likely to & if not, why not?

I'm a believer in technology. The printing press, machine tools, production lines, fertilizers, pesticides etc. all substantially increased per capita productivity and improved the material wellbeing of humanity.

Unfortunately IT hasn't delivered similar gains and that's where most technology investment has been targeted. It looks like we've just not invested in the right technologies over recent decades perhaps?

Agree.

It strikes me that some face value efficiencies are not deemed financially expedient to exploit or deliver.

Then there's human nature, what people do vs what they should do, the latter being what the developers have in mind for the way their systems work.

Add in the first point & it's easy to understand failure to capitalise.

From my dealings with manufacturing (especially the last six months), there does seem to be a a desire to bring things back to the UK from the far east, so maybe some opportunities there.

There are some exceptionally good people & operations in the supply chain, their talent & performance needs tapping to the max.

[speedy_thrills]

Smiler. said:

It strikes me that some face value efficiencies are not deemed financially expedient to exploit or deliver.

That approach likely had few downsides in prior decades because labour was so cheap and readily available before the largest cohort of the population, "baby boomers", started to retire. It's not a commentary on business or society but just an acknowledgement of the demographic reality that has existed for over a decade now.

I guess what I'd say is this. We now live in an industrialised world where the proportion of populations working is declining as more people retire than enter the workforce. Even if every person is more productive our per capita productivity may still decline.

However, relative to Southern and Eastern Europe, Northwestern Europe (inc. UK and Ireland) will likely experience this far more gradually.

[brickwall]

speedy_thrills said:

That approach likely had few downsides in prior decades because labour was so cheap and readily available before the largest cohort of the population, "baby boomers", started to retire. It's not a commentary on business or society but just an acknowledgement of the demographic reality that has existed for over a decade now.

I guess what I'd say is this. We now live in an industrialised world where the proportion of populations working is declining as more people retire than enter the workforce. Even if every person is more productive our per capita productivity may still decline.

However, relative to Southern and Eastern Europe, Northwestern Europe (inc. UK and Ireland) will likely experience this far more gradually.

This is only true for the Western World. In developing economies there is still a glut of young people all looking for a job. Take South Africa for example…60% of the population are under 34, vs. 9% over 50.

The UK delayed/temporarily solved its working demographic pressures through the 2000s with large scale immigration of young workers (from Eastern Europe and elsewhere).

That tap is now drying up, in part linked to Brexit, but also because the home countries have developed massively in the last 20 years and so the relative appeal of moving thousands of miles for a job/life is less.

[skwdenyer]

speedy_thrills said:

Smiler. said:

Which begs the questions, is it likely to & if not, why not?

I'm a believer in technology. The printing press, machine tools, production lines, fertilizers, pesticides etc. all substantially increased per capita productivity and improved the material wellbeing of humanity.

Unfortunately IT hasn't delivered similar gains and that's where most technology investment has been targeted. It looks like we've just not invested in the right technologies over recent decades perhaps?

There is investing for productivity, and there is investing for cost reduction and/or capability enhancement. I’d argue we haven’t done much of the former in the UK. There’s really surprisingly little hope and forward planning in many investment decisions.

If you want to invest for future gains in the UK, you buy property. That’s a really stupid result for the economy.

We need to break that cycle and once again ensure investment in productivity and growth is more profitable than investing in the shed that houses your unproductive minimum-wage workers.

[Throttlebody]

skwdenyer said:

There is investing for productivity, and there is investing for cost reduction and/or capability enhancement. I’d argue we haven’t done much of the former in the UK. There’s really surprisingly little hope and forward planning in many investment decisions.

If you want to invest for future gains in the UK, you buy property. That’s a really stupid result for the economy.

We need to break that cycle and once again ensure investment in productivity and growth is more profitable than investing in the shed that houses your unproductive minimum-wage workers.

The unsustainable UK property dream bubble is now starting to deflate. Another transition to a greater good.

[speedy_thrills]

brickwall said:

This is only true for the Western World. In developing economies there is still a glut of young people all looking for a job. Take South Africa for example…60% of the population are under 34, vs. 9% over 50.

The UK delayed/temporarily solved its working demographic pressures through the 2000s with large scale immigration of young workers (from Eastern Europe and elsewhere).

That tap is now drying up, in part linked to Brexit, but also because the home countries have developed massively in the last 20 years and so the relative appeal of moving thousands of miles for a job/life is less.

I'm not sure there is another China out there in the undeveloped world to replace the one that is now substantially industrialised and rapidly aging. China had always been an advanced civilisation until the Opium Wars, their development was likely expedited because it was a return as a global power.

Eastern European countries have some of the steepest population declines. There won't be a resumption of that pipeline of workers because they just don't have the working age people (nor, as you mention, the overwhelming economic incentive). Indian fertility is now at just the population replacement rate and on a downwards trajectory. Pakistan is probably a decade or two behind India on that trend. Either way it would only temporarily delay the inevitable.

The other thing that may not be immediately apparent is just how much of a role women have likely played in the economic boom we've seen. I seem to recall that after the second world war about a quarter of women worked, by the 70s that was about half and today that's three quarters in most industrialised countries which is substantially comparable to men. Along side population age demographics that's likely to be a one-off, never to be repeated, upswing that helped suppress wage growth and inflation.

We where just really lucky to live at a time when there was so much labour coming into the workforce making goods and services progressively cheaper and driving returns on assets. It's a brave new world for companies and consumers.

[Welshbeef]

Throttlebody said:

The unsustainable UK property dream bubble is now starting to deflate. Another transition to a greater good.

Where do you see this evidence?

Only yesterday/day before I posted up the link that house prices were up even more 12.4%.

[Welshbeef]

oyster said:

Which raises a good point I've been thinking about recently. Even if prices were to slow now and inflation fall back to BoE target by mid 2023 - is that sufficient? Yes, an inflationary spiral will have been avoided, but the impact of the previous inflation would still have ongoing economic effects and would still be removing money from the economy.

Using numbers:
The BoE target is CPI of 2.0%.
In May 2021 (1 year ago) annual inflation was at/near target at 2.1%, when the overall index of CPI was at 111.3.
The current index (May 2022) is at 120.8.
So assume annual inflation drops back to 2.0% by May 2023 (1 year on from latest figures).
The index would have risen to 123.2. Had inflation remained at target from 2021 to 2023 the index would have been at 115.8.

So even if this inflation spike is nipped in the bud now, prices will be permanently higher by 6% than if we had never had the inflation spike. Is this acceptable, or do we need to target inflation at 1% for a few years to 'catch up'?


Another way of looking at it is with petrol prices. They've gone up from 140p ish to 190p ish a litre. If they now only rise by 2% a year for the next few years - is that ok?

Correct - we would need deflation to resolve it.

This could happen if energy wheat and oil /petrol at pumps all plummet.
It’s also an interesting one when it then comes to pay rises as if you’ve had a pay rise in 2022 due to inflation not increased personal productivity then really you should be seeing a pay CUT in 2023 if there is deflation. If not you’ve locked in higher payroll into perpetuity whereas costs have dropped.

[turbobloke]

Welshbeef said:

Throttlebody said:

The unsustainable UK property dream bubble is now starting to deflate. Another transition to a greater good.

Where do you see this evidence?

Only yesterday/day before I posted up the link that house prices were up even more 12.4%.

I remember reading recently that UK house prices were growing at the fastest rate for 17 years.

A quick online search came up with this, published 3 days ago apparently "the average price of a UK home hit a record level for the fourth month in a row in May 2022",

[Throttlebody]

Welshbeef said:

Throttlebody said:

The unsustainable UK property dream bubble is now starting to deflate. Another transition to a greater good.

Where do you see this evidence?

Only yesterday/day before I posted up the link that house prices were up even more 12.4%.

Flawed ONS data. You didn’t even acknowledge the replies to your post.

[speedy_thrills]

Throttlebody said:

The unsustainable UK property dream bubble is now starting to deflate. Another transition to a greater good.

There will always be opportunities to invest somewhere. Imagine how well companies that make Giga presses or low-labour building systems might do. Perhaps having a good clear-out of zombie companies will help reinvigorate our economy.

[princeperch]

The middle are getting squeezed.

Due to having an expensive year buying and doing up a new house, I decided our early summer break for a few days on the coast would be on a shoestring. The kids are only very young anyway and all they want is to go in the sea and eat ice cream. So we've ended up at a parkdean static caravan type place on the coast for a few days, in Suffolk.

For me it's perfectly adequate, comfortable, almost new accomodation, right next to the sea, 15 mins from Southwold where we will spend most of our leisure time. Cost pennies to come here and its absolutely fine.

I am however absolutely stupified by the number of 30 to 40k cars here. Everyone has a new German car, or a discovery, or a new Kia.

Either they are all cheapskates like me after having a cripplingly expensive few months, or the middle are seriously downshifting their leisure activities.

[Sheepshanks]

princeperch said:

Either they are all cheapskates like me after having a cripplingly expensive few months, or the middle are seriously downshifting their leisure activities.

They’re being sensible and avoiding airports.

Anyway, bearing in mind that even pretty ordinary cars are £30-40K, is that really ‘the middle”?

[princeperch]

Last time I came to a static caravan park was well over ten years ago, but I recall it being full of bangers and people walking about in vests.

This is manifestly different I have to say.

[Merry]

princeperch said:

Last time I came to a static caravan park was well over ten years ago, but I recall it being full of bangers and people walking about in vests.

This is manifestly different I have to say.

Location would play a part. We went to a Haven in Scotland a few years ago. There were plenty of that sort of crowd.