Report
Patrick Artus

What part of core inflation is not due to wages?

The discussion on the possible return of inflation, especially in the United States, points to several possible causes of inflation: Strong growth in domestic demand, particularly for services; Bottlenecks (maritime transport, microprocessors, etc.); The rise in commodity prices (even though we are looking at core inflation); The need for companies to restore their profit margins after the recession. The question is how much these possible explanations for inflation weigh against rising labour costs, as wage growth is weakened by the crisis. What part of core inflation is due to causes other than wages? Is this part sufficient for inflation to rise even if wage increases are low? We look at the situations of the United States and the euro zone. We see: In the United States, a very high degree of inertia and stickiness in core inflation, which varies very little even in response to wage fluctuations; That in the euro zone, core inflation is well explained by wage growth. In theory, it is possible that in the United States, corporate concentration explain s this inflation inertia.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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