We gathered data on five key indicators. To gauge where inflation has become most pervasive, we ranked each country according to how it fared on each measure
A few factors explain what is going on. Total fiscal stimulus across Anglophone countries in 2020-21 was about 40% more generous than in other rich places, according to our estimates. It was also more focused on handouts to households . That may have stoked demand to a greater extent. Monetary policy in the euro area and Japan was already ultra-loose before the pandemic, limiting the amount of extra stimulus central banks could provide.
The simplest component of our ranking is the rate of “core” inflation. This measure gives a better sense of underlying price pressure. Among our ten countries, America leads the pack . A second measure, of dispersion, helps capture how broadly based price pressures are. A country where headline inflation is being driven by one or two items—say, the cost of a restaurant meal—is in less trouble than a country where the price of everything is going up quickly. To measure this we divide each country’s consumer-goods basket into as many as 16 components, then calculate the share where the inflation rate exceeds 2%. In Japan just a quarter cross that threshold.
Inflation could also spiral if workers demand higher wages to compensate them for rising prices . Unit labour costs, which measure the relationship between what workers are paid and the value of what they produce, are rising far faster than their long-run average in many countries. On May 5th America’s statisticians revealed that these rose by 7% in the first quarter, compared with a year ago, up from a pre-pandemic average of around 2%.
by researchers at the Federal Reserve Bank of Cleveland, Morning Consult, a consultancy, and Raphael Schoenle of Brandeis University, is a rare reliable cross-country gauge of public inflation expectations. In May 2021 a respondent in the median rich country thought inflation over the next 12 months would be 2.3%. Now they expect a rate of 4.5%; Canadians, an even higher 6%. A measure of Google searches for inflation reaches a similar conclusion.
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