A more medium to longer term story to the
upside of inflation is based around demography.
Over the last 35 years, the developed world has seen a
surge in its working age populations which has
been super-sized by China’s relatively sudden
integration into the global economy in the late
The combination created an excess of
labour and depressed global wages. This surge in
workers, however, has begun to reverse. This
means workers may start to accrue higher levels
of pricing power.
While some argue that technology, such as artifcial intelligence,
may replace labour and further depress wages, history
shows no such long-term effect. Arguably, the
pace of today’s technological development is as
fast as it has ever been, yet the developed world
is close to full employment. Growth, then, will
likely continue to find demand for workers, even if
it is in new areas.
So in a world where the general view is that
prices will stay low for a prolonged period of time,
there is much evidence that the US is at a point
where post 2018 may be the year where prices enter a
period of structural growth.