Inflation is biting. I have been sceptical that this was a wage-driven phenomenon given that in early December that UK private-sector employers expected to raise wages lower than inflation, while most public sector employees would struggle to get that.
As millions in the UK struggle with crippling cost-of-living increases, it is something I would much rather have been wrong on, whatever the governor of the Bank of England believes. While we are certainly not seeing the wage-push inflation that was feared last year, neither is it simply down to increased energy costs. As Fathom Consulting shows, it is likely that a reduction in aggregate supply has also played a part, with output struggling to meet pre-pandemic levels (see chart below). Deep Dive: 2022 looks to be better for yield While it is unclear as to how embedded inflation is -...
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