Tuesday, Aug 14, 2007
Volatility or stability?
Financial Times: UK inflation falls below BoE target
"The main contributor to the slowing of inflation was falling food prices sparked by a supermarket price war" Adam Cole at RBC Capital Markets, said that it was probable that some of the effect of lower food prices would be reversed in August, but nevertheless “the rate hike that looked like a near certainty after the [the Bank of England’s August] Report now looks more questionable.” This will indeed give Doves a branch for a few months, but still 6% by Christmas, 6.25% by Feb March 2008, me thinks.
I have a stinking suspicion that this leap and change could be a dramatic entrance of volatility, imagine if CPI went up 0.5%!
Sales at furniture shops also helped curtail inflation, with discounts available on kitchens, bedroom and lounge furniture (Symptom of a housing downturn?
14 Comments
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1. Renting said...
My partner and another friend work for two different well known supermarkets and tell me everyday how they are involved in a ridiculous pricewar where the supermarkets are absorbing huge losses. It goes like this:
Walmart subsidise ASDA as a loss leader so that they can undercut the other big 3
TESCO aggresively match ASDA (hence the recent pricematch campaign)
Morrison's and Sainsbury's are now having to match TESCO
It is completely unsustainable and is masking underlying inflation in a big way. Keep and eye on the share price and quarterly profit warnings coming out of these big retail companies in the coming months. My guess is that before the year ends their shareholders will force them to put their prices back up above the long term trend in order to recoup the costs that they have not been able to pass on to suppliers. This would be an unwelcome surprise for a dithering BOE.
2. mrmickey said...
Ok so the dice has been thrown and the BOE is going to try and hyperinflate it's way out of trouble with Sterling crashing. They slag Mugabe off for the way he runs Zimbabwe's economy but really there is no difference between the UK and Zimbabwe. In Zimbabwe the process is further advanced that's all.
3. mrmickey said...
And if you do have any savings and while they still have some value I'd buy something useful like a petrol generator.
4. stillthinking said...
I spent savings on two week holiday for myself. It's part of my inflation protection plan.
5. Nova Sideliner said...
Yo, MrMickey, are you on drugs? No difference between Mugabe's Zimbabwe debacle and the UK? Inflation in Zimbabwe is just one of the end results of several years of complete incometence and disastrous, truly disastrous, policies that decimated the productive sector of their economy. It's then been further compounded by the Zimbabwean government's complete ignorance of even basic economics. You reckon that the current UK government and BoE is that bad? Much as you might dislike Blair/Brown/King/etc., they are in no way at all similar to that blundering idiot Mugabe.
6. speculatorone said...
Now inflation is back under control it must mean:-
the house price crash is off
labour will be back in power
good old super PM GB is the most amazing, genuine great man of the people we will all love because he has delivered a super economy.
7. Orwell said...
I love irony Spec.,
David, fancy the next chancellor's job? If you could get elected?
8. mrmickey said...
Nova yes alright I am exaggerating but the principle is the same print lots of money to pay for things create lots of inflation and destroy the economy in the process, Zimbabwe's stock market is showing record highs by the way.
9. Red Kharma said...
Tesco gave away 10% off vouchers every week for the last month. That was on top of line price cuts. There is no way the MPC will use short-term food prices to influence their view of inflation trend. 6% is nailed on for me.
10. enuii said...
The Big Problem with any form of continual cost cutting is that it is ultimately unsustainable and there comes a point where the only way for prices to go is up, when this happens there will be no way to stop inflation.
11. deepak said...
What about when they bring there prices back to normal. We will have an unduly higher inflation in the market.
These figures count for nothing. Just more pain for the MPC where these skewed figures will leave them with more questions than answers.
12. Orwell said...
Someone on David Smith's site was advocating that only the other day I notice, the BOE just throwing infinite amounts of money at the credit crunch - and they didn't see that this would be inflationary......
Oh dear, oh dear oh dear...
13. dohousescrashinthewoods said...
Do the Gordster and Terror Leahy have an agreement?
14. denzil said...
Oh so a rate cut is a distinct possibility followed soon after by snap general election I suppose.