Pay 1990 : the spectre of stagflation

Hall, John M (1989) Pay 1990 : the spectre of stagflation. Quarterly Economic Commentary, 15 (2). pp. 79-86. ISSN 2046-5378

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As the economy moves into 1990, the outlook is precariously balanced between the risks of recession and inflation, with trends in pay settlements the key to future developments. There is a clear worry that if pay increases are not contained, as demand and and productivity fall off during 1990, pressures on prices will not moderate rapidly. Companies, already faced with a burgeoning financial deficit and a squeeze on profits and liquidity, may then be forced into a period of intense labour shedding, thus tipping the economy towards recession. The intensity of pressures in the labour market have once again raised the spectre of stagflation, albeit of a milder form than previously experienced and in the context of a far more benign international environment; slugflation may be a more appropriate term.