While markets are fixated on the threat of deflation and “lowflation” (a dumb word if ever there was one), our leading indicators are pointing towards modest core inflation ahead. Furthermore, our leading headline inflation indicator is rising moderately as well. We don’t have hyperinflation, but deflation is also an imaginary bogeyman.
Wage growth will also pick up for the rest of the year. This is driven by much tighter labour markets. At present we’re seeing near record low levels of short-term unemployment, a surge in higher wage expectations by small businesses, and one of the higher levels of percentage of sectors expanding employment.