Anyone hoping for an inflation-linked pay rise in the new year can forget it. The only good news in today’s data is that, at least it won’t be a pay cut: Britain is out of deflation – prices rose by 0.1pc year-on-year last month, according to the CPI (and were up 1.1pc on RPI). But that’s still next-to-nothing. But for those whose pay rises are not linked to inflation, it’s good news. We’re in a period of reasonable growth, zero inflation – and, as a result, rising disposable household income. A pretty good scenario, and one that is expected to last – and, thanks to a new graph system we’re trialling, we can show how it is expected to last. And the user can check that we’re not cherry-picking the data range: it goes right back to 1970.
Of course what really matters is whether pay rises will keep pace with inflation (ie, zero real wage growth) or whether pay rises will outstrip inflation. If it’s the latter, then a feel good factor starts to rise – especially in HM Treasury. For years, Osborne has had to preside over a country with flat real wages. But with inflation now elected to be so low for so long, that changes. Here’s the graph:-
Look at today’s inflation news on any other website and you will, at a push, be shown a graph of past performance. But the most useful information is what is expected to happen: information that journalists have, traditionally, not been so good at sharing. (It’s not programmed into the computers used to make graphs.) Of course, forecasts can be nonsense: as Woody Allen says, if you want to make God laugh then tell him your plans. But in this case, it’s useful because 12-month inflation forecasts are one of the things that economists tend to get right.
We’re just getting started on these charts – any feedback would be welcome.