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