Tuesday, Sep 18, 2007
Not in the real world it didn't
Bloomberg: U.K. August Inflation Rate Falls to Lowest Since March 2006
The U.K.'s inflation rate unexpectedly fell to the lowest since March 2006 last month, adding to evidence the Bank of England doesn't need to raise interest rates from a six-year high.
Posted by mrmickey @ 09:43 AM (1425 views) Add Comment
34 Comments
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1. inbreda said...
shouldn't that read:
"The UKs inflation rate was fiddled to make it look the lowest since march 2006 in order to provide justification for the BoE to keep the debt bubble inflated"
????
2. Ticktock said...
well well well, what do know ,CPI falls on queue again as RPI rises. (or DVD players and telephones etc. fall in price while the cost of living rises)
Headline - 'Inflation falls and economists now expect IR cuts'.
Spend your pounds quick because they ain't worth the paper they're printed on.
3. tyrellcorporation said...
This is hardly worth commenting on! Why don't they just issue a statement saying that inflation has been defeated forever - Hooray for the Brits!
4. wage slave said...
Last night I went shopping and 500g of Lurpack had gone up from £0.99 to £1.12.
Yes inflation's really low isn't it.
5. Mrbean said...
My god, wage slave's "Lurpack" index puts inflation at over 12% Lets try and stop the conspiracy theories shall we..
6. waitingfor hpc said...
just a pack of lies.
7. Yoss said...
Oh lovely, now if only the ONS could be resposible for setting next years council tax increases.
8. Hotairmail said...
Extract from the Bloomberg article..."Reductions in mortgage exit fees and clothing prices led the slowdown in inflation, the statistics office said."
When the hell did mortgage exit fees become part of the measure for CPI - just before the regulators started forcing the banks to reduce them no doubt. We all know that if one fee is removed it will bubble up elsewhere. But these other places (such as mortgage costs) are not actually part of CPI. But don't wish for mortgage costs to be included at this time because that will no doubt signal HPC and permanent reductions in inflation over the next 5 years!
9. uncle chris said...
More LIES from this discredited government. I bought a loaf of bread the other day for £1.20 that cost me less than 80p this time last year. Our council tax up 5%. Petrol 97p now, but somewhere in the 80's last year. The sad thing is that the civil service have now been politicised and no longer have the nerve to stand up to this blatant deception.
10. waitingfor hpc said...
why does nobody question this? where are the Tories, the economists even the realists.? What is going on in Britain. We should demand public showing of how these figures are arrived at.
11. tyrellcorporation said...
I'd just like to know what major and essential purchases are supposedly going down in price - I can't think of any! This pack of lies is really hacking me off now.
12. Aloha said...
and even if the inflation is low in august.... IT HAS BEEN WAY TOO HIGH FOR MONTHS!!!!!!!!!!!!!!!
13. waitingfor hpc said...
even china has inflation at 7% - so not even those goods are going down anymore. I suspect that this manipulation will be short lived as they must be running out of products that are going down in price by now.
14. talking rot said...
Chaps and Chap-esses
It doesn't matter if the article is a pack of lies. The CPI ised used to measure the rate of inflation in the UK. It is below the target of 2%. That puts pressure on the BoE to CUT rates - despite the fact that the BoE should be looking 2 years into the future. Readers of this web site might feel the CPI is a poor gauge of inflation - but it is the gauge which Gordon Brown has instructed the BoE to use. Given the current level of turmoil within the financial world, expect an Interest Rate cut. The CPI will continue to be used as the means to measure inflation until Gordon Brown finds it politically unacceptable to use it.
What is far more important is the subsequent knock-on effect of the impending cut. Will the Pound plummet? If so, will there be a subsequent rise in inflation? Will the lowering of interest rates result in consumers taking on more debt and landers being prepared to loosen lending criteria again? If so, as debt as a percentage of GDP increases, the Pound will be driven lower. Also consider the continuing price of oil?
I do not believe the outlook for the Pound is strong.
15. Adrianallen said...
Yes milk is going up, butter is going up, bread is always going up.. But have you checked the real items that impact inflation. Yes you know what im talking about. The price of Caviar and Champagne, MP3 players and Sat Navs? These are the items we are buying on a weekly basis from the local super market.
1.8% haha
16. Aloha said...
is the target 2% per month or per year ? how much is 2%/month over a year???? are the interest rates scaling with that?
17. waitingfor hpc said...
talking rot
I hear what you say - but last time the CPI was around 1%, interest rates were over 6%. If they lower rates and then the CPI rises, which I think it will, then the bank will be blamed for raising inflation fears again. Can they risk this now?
Even Greenspan is pointing out that we may be looking towards huge inflation problems.
A cut is not certain - and in my opinion will not result in more borrowing. 1. the banks are now burnt & 2. people are worried.
Point of interest - i ran over my Barclaycard credit limit with a large purchase last month (I pay it off every month) - they phoned me up to say my credit was over and that my wage was registered as 20k but had not been updated for 5 years. I told the young guy that I was now on 300K - he typed it on his computer with no questions asked and then said my credit was good again. Laughable - and very very scary.
18. speculatorone said...
They might as well give the green light to another boom at this rate. Yesterday gave us all a bit of hope, now they are spinning again, I just wonder where it will all end?
19. planning4acrash said...
"However, the RPI inflation measure - which includes mortgage interest repayments - rose to 4.1% from 3.8%."
Wow, what a jump, and what a pack of lies from the BOE. This points towards the intentions of politicians rather than inflation. Presumably it was part of gearing up to an early election, which will now not happen aftern Northern Rock.
20. Dr K said...
The whole political system in this country is corrupt. It is going to take a calamitous event to shake the economy (and housing market) because this Government will cook the books and manipulate the truth to remain in power, curry favour with the banks and maintain the debt-lead society we live in. And remember, the "house owning democracy" are a huge political force and must be appeased, unfortunately, most of us on this site do not contribute to the National debt therefore we do not count!
21. tyrellcorporation said...
Expect the government to hose-pipe public money wherever needed to smooth things for an early general election. I still think we're looking at an election in the next 3 months. I just can't see GBs prospects holding up much beyond that.
Will the BoE/MPC make the same mistake as they did when they cut rates in August 2005:? probably! :(
22. Swiss Toni said...
Notice how Gordon Brown has gone into hiding?
He always did this as Chancellor when things got hairy.
WHERE ARE YOU GORDON?
23. dugmug said...
The drop seems to be mainly pinned on clothing, which has been reduced in price to desperately try and move the stockpile of T-Shirts and bikini's all the retailers got in for the summer when really it should have been raincoats. This is not a long term factor, and I think Merv will understand this, whatever the shortcomings of the BoE. I certainly don't see a rise in rates under the current circumstances, but I'm pretty sure there won't be an imediate cut either - partly because of mid- to long-term inflation worries, partly because of preserving the value of the pound, partly because of the wrong signals it would send, and partly because it's questionable how much difference it would make anyway with mortgage rates detaching from the base-rate.
The details in the article are interesting though. "increase in ticket prices for live music and theater also spurred inflation" - unless you are a major muso or lovee, these are going to be very occassional purchases and the first things to be trimmed out of household expenditure when times are tighter, and yet they form part of our "core" inflation measure!
"Reductions in mortgage exit fees" First question is how come mortgage payments aren't in CPI but mortgage exit fees are!!! But the main issue here is why on earth would banks reduce the cost you of taking your custom elsewhere??? Have they been forced to do this and I somehow missed the news about it? Are they trying to make it easier for risky borrowers to leave their books!!? Anyone got the inside track on this one please?
24. Eyeoftheweasel said...
Yesterday I went shopping in a well known supermarket with my wife. It was the frst time we had been for a couple of weeks, and we noticed how much the prices of some of the basic items we usually buy had gone up.
25. wage slave said...
CPI may be the measure of inflation the BOE has been instructed to look at, but it is not the rate of inflation that we all experience.
In my opinion this is the government inflating away on the quiet as it and the country as a whole are in so much debt, and it doesn't want a recession / depression to deal with.
The government aren't frightened of inflationary policy because they will always use the CPI as a smokescreen to hide behind to say it isn't happening. They are worried about a HPC - that's when the economy goes down the shute and will use any trick in the book to prop up the property market.
On the Radio 5 phone-in this morning there was a correspondent that was saying that Northern Rock's lending book was ok. Two consecutive callers came in and pointed out that this was based on over-inflated house prices - no, no, no everything's fine was the correspondent's response. The 'debate' quickly moved away - I wonder why ?
26. speculatorone said...
Eyeoftheweasel said...
I agree. My wife has been moaning about how much milk has gone up in last two weeks, from £1.00 to £1.32!!
27. Talking Rot said...
Inflation is the amount of stuff you can buy with your Pound.
@Wage Slave
If you are right, the amount of stuff people can buy with their Pound will decrease at a time. At the same time, wages will be stagnating as there is no inflation and therefore no need to increase wages. (This is not quite true as the RPI is used for wages rather then the CPI but wages are lowered by high inward immigration so the difference could be broadly cancelled out). For an economy based upon the City and Consumer Spending, this course of action will lead to a recession.
The alternative is to have higher wage inflation. This will increase inflation and, of the BoE is independent, result in higher interest rates. For an economy up to its eyes in debt, this course of action will lead to a recession.
I agree with you that the Government are scared stiff of a decline in house prices. I believe the decline in house prices in the early 1990s caused the absence of "The Feel Good Factor" and resulted in John Major's disasterous political defeat in 1997. The Government will do everything in its power to prevent a decline in house prices. They might be successful, but they might NOT be successful. They have been successful so far and so there is no reason to doubt that they can't pull some dubious trick and be successful again, and again, and again. It will be interesting to see if the global economy and the global financial market can be fooled indefinitely.
Given that top Bankers, Stock-Brokers, Financiers are able to fool their companies into giving them HUGE bonuses for a pretty average performance that merely boosts short-term gain over long-term success, I believe the Government will be largely successful.
28. Housecrashwallop said...
Inflation 3%, now 1.8% , banks asking for loans, nationalising the debt, don't panic Mr.Manwaring, it's all part of the miracle!
The miracle being how they suckered so many in. How dare the government back a bank with MY money, my hard earnt and over taxed wages are going to cover the ass of the economy. He is corrupt and makes Saddamn look more competent.
29. Mojo said...
Gordons a liar. Mervyn King is his Rubber boy, his Gimp. The rest of the bank of England interest rate policy team are Gimps to the head Gimp Mervyn. I can imagine them sqealing when BIG Gordon goes around the room with his studded Cod Piece !!! His headmaster Uniform, and then stands behind Mervyn and says 'Well what have you got for me boy ?'
Basically Bank of England are GIMPS!!!
Hee Hee Hee Hee
30. C'mon Correction said...
Bye, bye Sterling. Hello imported inflation !!
31. Refusetobuy said...
"RPI inflation rose to 4.1 per cent in August, up from 3.8 per cent in July, mainly due to an increase in average mortgage interest payments"
"RPIX inflation – the all items RPI excluding mortgage interest payments – was 2.7 per cent in August, unchanged from July."
Yet CPI still goes down.
http://www.statistics.gov.uk/cci/nugget.asp?id=19
IMHO Prices of goods are not a good way to measure inflation. Inflation measures should include volumes of all things sold, as well as prices and compare it to the amount of money available. A simple way to do this is to look at the growth in money supply against GDP growth (also a flawed measure, but less so). Can't find a source, but I'd estimate inflation on this measure at about 13%-4% = 7%.
FYI
CPI weightings
Item - % - Variability
==================
Food & non-alcoholic beverages - 10.3 - High
Alcohol & tobacco - 4.3 - Low
Clothing & footwear - 6.2 - Medium
Housing & household services - 11.5 - Medium
Furniture & household goods - 6.8 - Medium
Health - 2.4 - Low
Transport - 15.2 - High
Communication - 2.4 - Low
Recreation & culture - 15.3 - High
Education - 1.8 - Low
Restaurants & hotels - 13.8 - Low
Miscellaneous goods & services - 10.0 - High
http://www.statistics.gov.uk/articles/nojournal/CPI&RPI_basket_2007.pdf
Note that it takes a month to collect and compile the data, so there is a lag effect in published numbers. These are mid August numbers. Today's anecdotal stories relate to next months inflation figures.
32. dbnazz1 said...
Waitingfor HPC...
I am afraid that the reason why the Government get away with peddling so many lies is probably twofold. First the majority of people have lost the ability to think for themselves and
secondly the majority of people are more interested in Big Brother and such like. This doesn't apply to the people who use this site because, by the fact that they use the site, shows that they realise that things are very different from what they are hearing from the Government, V.I.'s, etc. The majority of the UK population has become like a herd of sheep. For evidence of this just think about how much many/all of us on this site realise how much damage Gordon Brown has done to the economy (a fact which is so blindingly clear to me)
and then just think about how the mass of people/sheep in this country feel that he has done a great job as Chancellor.
33. dohousescrashinthewoods said...
Just posted a comment to the BBC here to ask if anyone is doing any investigative journalism to find out if the CPI is being manipulated. Wouldn't it be nice if it slipped past the government censors? Even if they did a spin piece on it, it might just draw more attention and anger from the public, increasing the pressure on Brown.
34. dohousescrashinthewoods said...
17. waitingfor hpc - that is a fantastic story. Chilling.
25. wage slave - CPI is a smokescreen.. or perhaps a fig leaf ;)
20. Dr K - debt-lead economy - how true:
- lead weight of debt
- lead shot
- goldilocks turned to lead-head
- CDOs as poisonous as lead