UK Confronts 1970s-Style Problems With Strikes and Inflation
Comment of the Day

June 20 2022

Commentary by Eoin Treacy

UK Confronts 1970s-Style Problems With Strikes and Inflation

This article from Bloomberg may be of interest to subscribers. Here is a section:

The UK this week will face up to surging inflation and labor strikes as well as a rising risk of recession in a series of setbacks that have echoes of the 1970s.

Strikes are likely to halt at least half of all trains for three days in the worst disruption to mass transit since Margaret Thatcher was prime minister. The teachers union also is set to ballot its members on a strike, adding to the list of professions considering action.

​On Wednesday, inflation is set to rocket to a new 40-year high with the cost of goods leaving factories already racing ahead at a double-digit pace. Last week, the government confirmed the economy shrank in the three months through April, the weakest performance since a coronavirus lockdown.

Eoin Treacy's view

The risk of a wage/price spiral is nontrivial in the UK. The effort to keep wage increases below the official inflation rate is obviously aimed at reducing that possibility but workers are understandably upset. The challenge is everyone feels the same way, but only the most organized unions have the collective bargaining power to achieve their goals. That’s going to further underscore the gap between the privileged and the underrepresented in society. Meanwhile transportation strikes fall most heavily on people who do not have the luxury of working from home.
The FTSE-350 Index steadied today from the region of the 1000-day MA. This performance begs the question whether risk of a UK recession is already priced in.

The FTSE-350 Industrial Metals & Mining Index also steadied today in the region of the trend mean. There have been some large downward dynamics and two large downside weekly key reversals are warnings that supply is becoming dominant. Therefore, the Index needs to hold the current area to retain some semblance of consistency.  

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