In the middle of the week the Istat press release regarding theinflation in June, equal to 1.3%. In practice it was the same level as last May.
While waiting to discover the future dynamics, probably 2 blows will hit the paychecks and savings of these workers who will find themselves less money.
Regarding inflation this summer 2021
According to preliminary Istat estimates, the cost of living in June remained unchanged from the previous month. Instead, the national consumer price index for the whole community (NIC), gross of tobacco, rose by 0.1%, on a monthly basis.
For the Institute of Statistics, the cost of living is mainly affected by the increases linked to the prices of energy goods. A boom that could act as a detonator on the rest of the economy, dragging up the respective price lists.
In fact, expensive oil enters directly or indirectly into all production cycles, without exception. The most obvious consequence is that this can only be a beginning of the hikes. After all, world GDP is estimated to grow as the pandemic will be a distant memory.
The graph below (source: Reassess) would seem to confirm this (at least) short-term trend.
The first blow that will hit the paychecks of some workers
Fixed income earners, therefore, will suffer this increase in the cost of living until the next adjustment of their pay slips. Only if at the end of the year the increase was actually temporary, the damage will be detected to a small extent.
Conversely, for those who have the opportunity to directly affect their prices. It could in fact adjust them in real time to the high cost trend.
Of course, in these cases one should also estimate the effect of the price elasticity on the variation of one’s demand.
Also in this case, therefore, a game of balances is envisaged between the defense of one’s market share and avoiding the blows of inflation.
Therefore, 2 blows will hit the paychecks and savings of these workers who will have less money
The 2nd element to consider is not a blow on the upcoming payrolls but it is indirect and affects those already collected. Precisely, those that have been saved in the form of liquidity (the current account, so to speak). It is indeed shocking to find out how much 10 thousand euros have been deposited in banks since the beginning of the year.
The same could also be said for those savings flowing into fixed income instruments. In this case, however, it is a blow with variable geometry. That is, it grows as the gap between the chosen level of return and the rate of inflation increases.
However, let us specify two elements.
The first, that the nominal value of savings will remain unchanged: its purchasing power will be reduced, which in a certain sense is equivalent to losing pennies. In practice, the same is true for payrolls.
Secondly, that it is a personal decision, so everyone is responsible for their choices. The important thing is to remember that inflationary damage is excruciating in the medium to long term. To realize this, this is what 10,000 euros are worth deposited on a non-interest bearing current account after 20 years.
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