Inflation is predicted to stay obstinately high while wages lag, shrinking demand in households with ever less to spend.
Imagine that you were a country worried that the amount that must be paid locally for labour made the production of that country uncompetitive on the world markets. No, go on, really, imagine it: you\’re Germany circa 2000.
So, what do you do? Quite, you deliberately plan to have wages grow less quickly than either (or even both) inflation and productivity growth.
The outcome of which is? Quite, look at Germany today.
So, UK today: our trade deficit does show that the place ain\’t competitive in many things. So, what should we do? Yup, let\’s have a little burst of inflation to lower real wage costs.
And won\’t Will Hutton be pleased that we\’re finally following Germany?