[andy popp]

If we think there’s a cost-of-living shock in the UK I was amazed at how expensive the US has become since I was last there in 2019 (groceries in particular).

I've heard a few people say that but the CPI figures look to me as though US inflation was slightly less than UK inflation.
https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d81b2

But they're not comparing their experience of inflation to inflation in the UK. They're comparing it to the prices they are used to paying. And they're very used to groceries and petrol being cheap, almost as a right. There's a very heavy dependence on cars that it's pretty much impossible for the average American to escape from and "high" gas prices hit poorer working Americans very hard (it's completely irrelevant to them that gas is still very cheap compared to most paces). Talking to one particular member of my wife's family recently, they were absolutely furious about inflation and placed the blame squarely on Biden - it happened on his watch. I don't know how they voted, but if it was for Trump that would be the reason.

[stone]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern. In the USA they had similar inflation, that was roughly matched by wage increases, and they are, as you say, furious about it. 

[teestub]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

I think there is/was a lot of concern? Restaurants for example are still closing every week due to their drastically increased costs and people not being able to afford to eat out as much. Truss’s budget was a defining moment among all the recent PMs and I’m sure a lot of people had that in mind when voting.

[andy popp]

And the UK electorate did just heavily punish an incumbent government (admittedly not only because of inflation, but it's not the sole explanation for Trump's victory either).

[gme]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

do you really think this. It’s the biggest concern people have here and is fundamentally used by populists to drive there ideas.

[jwi]

People really really do not like inflation. In my opinion, it was the high inflation in the 80s in the nordic countries, together with financial expansion in real-estate and predictable financial crisis, that lost the social democrats their politicl hegenomy of more than 50 years. But mostly the inflation.

Stancheva has published her findings from a big survey she did to find out what people in US thinks about inflation in an eminently readable paper https://www.brookings.edu/wp-content/uploads/2024/03/1_Stantcheva_unembargoed.pdf

In short, the respondents believe that price rises are fundamentally unfair and thought that inflation widened the gap between rich and poor, while businesses allowed prices to rise because of corporate greed. Most tend to view the economy through a lens of morally right or wrong rather than something driven largely by market forces.

'If there is a single and simple answer to the question “Why do we dislike inflation,” it is because many individuals feel that it systematically erodes their purchasing power. Many people do not perceive their wage increases sufficiently to keep up with inflation rates, and they often believe that wages tend to rise at a much slower rate compared to prices.

'This perception of diminished living standards due to inflation is intensified by the observation that individuals rarely ascribe the raises they receive during inflationary periods to adjustments for inflation. Rather, they attribute these increases to job performance or career progression, particularly among those who have switched jobs during such periods.

'Why do individuals believe that wages do not increase as rapidly as prices? A primary reason is the conviction that employers and companies possess significant discretion in setting wages and tend to resist adjusting them upwards to enhance their profit margins. There’s a prevalent view that firms make strategic choices, with a more limited belief in market forces driving decisions.

[spidermonkey09]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

do you really think this. It’s the biggest concern people have here and is fundamentally used by populists to drive there ideas.

Exactly. Did you watch the same election Stone?! Cost of living was the number one issue I thought.

[Wellsy]

Not unreasonable imo for people to view employers, companies and corporations as setting the price for goods and services at a rate which brings them the maximum benefit.

The problem of course comes with which government policies or lack thereof they ascribe to it. But yes inflation is the kiss of death. What strong controls do we have over prices?

[JamieG]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

do you really think this. It’s the biggest concern people have here and is fundamentally used by populists to drive there ideas.

Exactly. Did you watch the same election Stone?! Cost of living was the number one issue I thought.

It also depended heavily on which sector you work in. Public sector workers saw very little wage increase compared to prices over the last couple years. Private sector in general did a bit better. Almost like we had a Tory government.  See the graph here: https://www.bbc.co.uk/news/business-64290162.amp

[petejh]

If we think there’s a cost-of-living shock in the UK I was amazed at how expensive the US has become since I was last there in 2019 (groceries in particular).

I've heard a few people say that but the CPI figures look to me as though US inflation was slightly less than UK inflation.
https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d81b2

Others have already pointed out inflation has been a huge concern for the average person, in both US and UK.

In addition you're taking the US CPI at face value as if it tells the truth of a person's lived experience, you probably shouldn't. You should be especially sceptical in an election year:

Lets preview the upcoming Inflation Print by first laying out the setup:

1. The Data is “rigged”
In the March PPI report, I noted that PPI came in “cold” because gasoline prices were recorded DOWN -3.6% MoM, whereas for the CPI report gasoline prices were recorded up +1.7% MoM. I found that really weird, because when I checked, gasoline prices were actually UP +6% in March.

It turned out that the beauty was in the detail: the BLS (US Bureau of Labor & Statistics) noted that in March, gasoline prices were UP 6.5% BEFORE SEASONAL ADJUSTMENTS! But seasonally adjusted, gasoline prices were down 3.6%! Because why not.

I joked that my American friends should ask for the “seasonally adjusted price of gasoline” at the pump station, and see what happens.

My point is this: the data is kind of made up, or at least “embellished”. “They” know it, we know it. At this point, we are all just playing along.

The above by a well-respected market analyst.

[Wellsy]

There are also several economies, so to speak, and whatever the overall number is, individually or regionally or demographically it doesn't help you if you're in the shit that others maybe aren't?

[BrutusTheBear]

And the UK electorate did just heavily punish an incumbent government (admittedly not only because of inflation, but it's not the sole explanation for Trump's victory either).

 
Disagree with this, although the Labour Party had a landslide this year, in terms of MPs in Parliament, the percentage vote share and total number of votes would suggest something else.  Certainly not enthusiastically voting for Labour to punish the incumbents and a split in the 'right' vote handing it to them also. 
Labour Party % of vote and totals>
2017 - 40%      12,877,918
2019 - 32.2%   10,295,907
2024 - 33.7%    9,708,816

[Will Hunt]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

I'm staggered by this. If not the cost of living, what do you think was the electorate's principle concern in this year's general election?

[spidermonkey09]

And the UK electorate did just heavily punish an incumbent government (admittedly not only because of inflation, but it's not the sole explanation for Trump's victory either).

 
Disagree with this, although the Labour Party had a landslide this year, in terms of MPs in Parliament, the percentage vote share and total number of votes would suggest something else.  Certainly not enthusiastically voting for Labour to punish the incumbents and a split in the 'right' vote handing it to them also. 
Labour Party % of vote and totals>
2017 - 40%      12,877,918
2019 - 32.2%   10,295,907
2024 - 33.7%    9,708,816

I don't see how you disagree. Whether Tory voters switched to Labour, the Lib Dems or Reform, they were all motivated by punishing the incumbent's record, of which inflation was a large part? 

[andy popp]

Most tend to view the economy through a lens of morally right or wrong rather than something driven largely by market forces.

See E.P. Thompson's classic essay "The Moral Economy of the English Crowd."

As Pete says, it's people's lived experience and how they understand that experience that really matters.

[stone]

I guess I'm just interested that here we had inflation, that was roughly matched by wage increases, and it didn't seem much concern.

I'm staggered by this. If not the cost of living, what do you think was the electorate's principle concern in this year's general election?

I thought it was mainly about the collapse of public services: NHS no longer working, burglaries not being investigated, trains late/cancelled, sewage in rivers etc. (eg apparently this link (I can't check link because not on X) https://x.com/SteveAkehurst/status/1848643577020100891 )
The last couple of years bucked a trend in that wage growth actually outstripped inflation slightly on average.

[andy popp]

And the UK electorate did just heavily punish an incumbent government (admittedly not only because of inflation, but it's not the sole explanation for Trump's victory either).

 
Disagree with this, although the Labour Party had a landslide this year, in terms of MPs in Parliament, the percentage vote share and total number of votes would suggest something else.  Certainly not enthusiastically voting for Labour to punish the incumbents and a split in the 'right' vote handing it to them also. 
Labour Party % of vote and totals>
2017 - 40%      12,877,918
2019 - 32.2%   10,295,907
2024 - 33.7%    9,708,816

I don't see how you disagree. Whether Tory voters switched to Labour, the Lib Dems or Reform, they were all motivated by punishing the incumbent's record, of which inflation was a large part? 

Or just stayed home - it's all punishment. Even some senior Tories showed some sign of understanding that.

[petejh]

People really really do not like inflation. In my opinion, it was the high inflation in the 80s in the nordic countries, together with financial expansion in real-estate and predictable financial crisis, that lost the social democrats their politicl hegenomy of more than 50 years. But mostly the inflation.

Stancheva has published her findings from a big survey she did to find out what people in US thinks about inflation in an eminently readable paper https://www.brookings.edu/wp-content/uploads/2024/03/1_Stantcheva_unembargoed.pdf

In short, the respondents believe that price rises are fundamentally unfair and thought that inflation widened the gap between rich and poor, while businesses allowed prices to rise because of corporate greed. Most tend to view the economy through a lens of morally right or wrong rather than something driven largely by market forces.

'If there is a single and simple answer to the question “Why do we dislike inflation,” it is because many individuals feel that it systematically erodes their purchasing power. Many people do not perceive their wage increases sufficiently to keep up with inflation rates, and they often believe that wages tend to rise at a much slower rate compared to prices.

'This perception of diminished living standards due to inflation is intensified by the observation that individuals rarely ascribe the raises they receive during inflationary periods to adjustments for inflation. Rather, they attribute these increases to job performance or career progression, particularly among those who have switched jobs during such periods.

'Why do individuals believe that wages do not increase as rapidly as prices? A primary reason is the conviction that employers and companies possess significant discretion in setting wages and tend to resist adjusting them upwards to enhance their profit margins. There’s a prevalent view that firms make strategic choices, with a more limited belief in market forces driving decisions.

Ties in with how most people perceive risk and reward.

Most of us are predisposed towards believing personal gains are a result of our own correct actions, within our control. Whereas we're prone to believe losses are the result of bad luck from outside forces beyond our control. It's rare to instinctively believe personal gain is the result of risk inversed, aka good fortune, and normal to believe personal loss is the result of risk. When wages increase more than inflation most people believe at least in-part that it's a fair result of them being good workers, rather than it being a reaction to the personally uncontrollable outside forces of inflation. When inflation runs higher than wage increases, most people believe it unfair and solely due to the uncontrollable outside force of inflation.

Another more fundamental mechanism at work is psychological loss aversion. People are averse to places/events/people (e.g. people in authority) that they associate with loss. Played out at a national voter level you get incumbent governments punished for feelings of loss whether or not it was directly their 'fault'.

[stone]

It's interesting that 2% inflation is thought more conducive to contentment than 0% and yet 10% inflation causes such anguish.

Personally I don't really care. To me what matters is employment and inflation adjusted wages and whether things are working well in general. If that came with 30% inflation or -10% deflation, I'd be fine with it.

[petejh]

Then you don't understand inflation.

2% isn't a magic number where all is fine with the world. But it is within the range of price inflation that provides for a sensible and relatively comfortable lived experience of price changes.

Read up on why high inflation or deflation makes for an uncomfortable lived experience of price changes - you'll quickly realise you're not actually 'fine with it'. People in emerging markets aren't fine with high inflation.

[Will Hunt]

Personally I don't really care.

Lucky you, but if you're trying to understand politics then you have to understand that to "not care" about inflation is to be highly privileged (or naive). To most, very high inflation or deflation will have an all-too-real impact on their quality of life.

[abarro81]

Something I listened to recently covered why something in the 2-5% range was sensible as a target, but I can't remember whether it was More or Less or PM...

[stone]

I did say that so long as employment and wages and stuff in general were all fine, I'd be fine.

To me, that qualification covered all the potential problems I could envisage.

I'd certainly rather have inflation but be employed, with adequate wages, somewhere with eg decent health care, law and order, transport, etc than have perfect 2% inflation but unemployed, or bad wages, or rampant crime, bad transport, dysfunctional health care, whatever.

To me it seems "privileged, naive or both" to take the opposite view.

We are considering the recent US case where the economy did function pretty well in terms of employment and wages and production levels despite inflation.

I'm all for targeting inflation as a means to the end of ensuring the economy works well in real terms eg to the extent that it facilitates investment and efficiency etc.

[Will Hunt]

Something I listened to recently covered why something in the 2-5% range was sensible as a target, but I can't remember whether it was More or Less or PM...

I heard this. The Explain Like I'm 5 is that inflation is tolerable if it's at a manageable level. Prices in the shops creep up, your wage creeps up, you hardly notice. Stone points to wages keeping up with inflation recently which is only true for some parts of the economy.
Deflation is intolerable. With prices falling there is a big incentive to stop spending. Your company needs a new machine, or to employ a new person, or you need a new car. Why spend now if you can hold off a year and get it for cheaper. Demand in the economy declines and you end up in recession.

So if deflation is a cliff edge which you must avoid falling from, you don't walk as close to the edge of the cliff as you possibly can, meaning any small deviation from target results in falling off the cliff. Instead you walk a couple of meters (or percent) away from the cliff. I don't think there's any science (Sean will be along to correct me) beyond 2% being a figure that is comfortably far enough from the deflation cliff edge, but not so high as to be painful to consumers.

[Will Hunt]

I did say that so long as employment and wages and stuff in general were all fine, I'd be fine.

To me, that qualification covered all the potential problems I could envisage.

I'd certainly rather have inflation but be employed, with adequate wages, somewhere with eg decent health care, law and order, transport, etc than have perfect 2% inflation but unemployed, or bad wages, or rampant crime, bad transport, dysfunctional health care, whatever.

To me it seems "privileged, naive or both" to take the opposite view.

We are considering the recent US case where the economy did function pretty well in terms of employment and wages and production levels despite inflation.

I'm all for targeting inflation as a means to the end of ensuring the economy works well in real terms eg to the extent that it facilitates investment and efficiency etc.

All those things you mentioned are interlinked with inflation. Inflation isn't a purely abstract figure that exists separately from people's lived experience of day-to-day spending and public services.