Monday, Dec 10, 2007
Well, well........
BBC News: UK factory gate prices see jump
Price inflation of goods leaving UK factories has reached its highest rate in 16 years, official figures show.
Posted by wiltshire @ 10:18 AM (1478 views) Add Comment
21 Comments
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1. tick tock said...
I'm sure Blanchflower will take this as strong indication of the need to cut Interest rates!
If I was Merv. I'd quit and leave them to their folly.
2. planning4acrash said...
Lets wait to see how Merv voted. If he was outvoted again he is doing a good job and should press on. I know that he enjoys saying I told you so about the ill fated cut during, was it 2004? (Tho its a shame that he didn't vote for a rise the months after). I'm reserving judgement until the minutes are released.
3. planning4acrash said...
www.propertysnake.co.uk: 109,005
Well, seems that sellers believe in a return to the bull market. But where are the mortgages to buy these properties? Just goes to show how scraps of hope drive sentiment in this market.
4. speculatorone said...
planning4acrash said...
That's what is said last week, the agent I know sees this as a green light to get things going again. Surely the market can't start on another bull run?
5. uncle chris said...
Hmmmm - I know of 5 friends/associates who are trying to sell their's houses at the moment - they have all been on since the summer and report that interest is non-existent. That said, when quizzed, all are reluctant to look upon dropping the price as a solution to their properties not selling. Somehow, EAs have drawn people away from the fact that property is only worth what people are willing to pay for it, and many now look upon a valuation as money in the bank. The only friend that has sold in the past 6 months was the one willing to drop her price by nearly 20% because she was desperate to move.
6. uncle tom said...
p4c,
Don't read too much into the propertysnake numbers - it's very common for people to take houses off the market completely over the Christmas period, and then try again in the new year. No doubt many of those will set a lower asking price when they put them back up for sale - but will the snake recognise it as the property previously offered? - I'm doubtful..
As for this data release, well I hope our Merv voted against the cut, as I think he's basically a decent guy. But his job is under immediate threat if he doesn't do what the govt want.
I hope he takes the honourable course - do the right thing, let the govt sack him if they dare, and if they do, write a book and hit the lecture circuit - he can probably earn more that way anyway!
7. maddison said...
Of course as the UK is just a nation of journalists, accountants, lawyers and bankers why should we give a hoot about the prices of badly made goods leaving UK factories....
8. Hpwatcher said...
I think the property snake figures highly suspect. A number of times I have clicked on houses being reported to have dropped...only to find out that the asking price hasn't dropped at all and property snake has got it wrong!
9. denzil said...
Factory gate inflation has been an issue for around 12 months now so this is nothing new.
I'm still staggered by the decision by the MPC to cut rates last week. Food inflation is rocketing, Oil is around $100 a barrel, factory gate inflation (an inflation which feeds through everywhere) is reported as being the highest in 16 years and the figure allegedly representing inflation felt by the consumer called the CPI is only just within its limit, thanks in the main to a diet of meat and three veg being replaced with ipod and three pairs of ASDA pants.
Maybe I was naive thinking the MPC were independent
The minutes of the meeting of the MPC will be interested. Mervyn King voted against the decision to cut rates in Aug 05, his vote I believe was exactly the right call. I firmly believe that a cut last week was wrong and I will be interested to hear how King voted.
10. Colly Wolly said...
You forgot about the nation of property experts that we all seem to be these days as well.
11. new user 2007 said...
This should be thought of as a process involving greed. In June estate agents told sellers the house was worth, say £250,000. Since the market turned down the seller has refused to reduce his prices. Since November estate agents are seeing no money coming in so they will from now tell new potential sellers even on the same street that the house is worth, say £225,000. That is how the first step will take place i.e. they need to cut to get their commissions. The "savvy" new group of sellers may be unwilling to think £225,000 is high enough as they have seen how much their neighbours are asking for. The savvy buyers will know the houses they were looking at 3 months ago are still there.
Anyway, inflationary pressures are obvious. It is such a no-brainer given commodity prices, China exporting inflation etc (well into the two year inflation forecasting cycle of the BoE). I was shocked by their decision. It seems house price rises and excessive liquidity are not inflationary on the way up, but house price falls and a return to normal liquidity are deflationary. Pathetic.
Anyway, what matters is if banks are still unable to give multiples of 7 with low deposits. If that remains a closed avenue no one can offer what they did even 2 years ago (as rental yield growth and incomes will not support current prices).
12. jack c said...
Looks like keeping the UK Casino economy going takes priority over controlling inflation.
There might also be a separate agenda emerging here i.e. personal debt has risen to record levels whilst inflation (according to the official statistics) remains low – it is generally accepted that for many it will take a lifetime to repay their debts and the debt wont be eroded by inflation compared with say the 70’s and 80’s. If inflation is deliberately allowed to rise then personal debt could in “real terms” be cut in a shorter time frame. Anyone else have any thoughts on this ?
13. Pelethar said...
What an utter disgrace this last interest rate cut truly was. Worse than the one in 2005. Utterly without any economic or moral justification, this was 100% political.
14. handle_it said...
I think last weeks cut was understandable. The economy is bad, real bad. Keeping rates the same would have done little or nothing to help dampen inflation. A drop of .25% won't save the housing market or win the next election for Labour but what is the alternative ? A rise would seem the right course of action to deal with inflation but what would the consequences be ?
15. wdbeast said...
I think there are a lot of sellers currently taking their properties off the market having previously reduced their prices.
Everyone knows that you don't sell property over December and January, so following the interest rate cut and the VI propaganda about prices recovering in the spring, many sellers are now removing their properties to "remarket" them in the spring (IMHO)
What price they go back out at is the interesting question.
Many have said it already, it will be spring when we see the market correction start, most are still in De Nile!
16. uncle tom said...
Jack,
I think you've got it more or less sussed - we're at the close of an era of low inflation and mega debt build, with economic dependency on increasing debt - 'living on air'.
I don't think this position can unwind gracefully, so a depression seems likely. Inflationary pressures will be very difficult to resist, and the temptation to let inflation erode the legacy of debt will be considerable.
17. Hpwatcher said...
''A rise would seem the right course of action to deal with inflation but what would the consequences be ?''
Inflation would be under control???
I really don't think it is the job of ''The Bank of Brown'' to support a bubble in house prices...
18. the reaper said...
Jack c,that is the key.The quickest way out of this mess is a quick bout of hyperinflation.Is it the right thing to do.No.The repercussions of something like that would be felt for years by everyone,not just the,admittedly many,in debt up to their eyeballs.
Even so,it could only happen if certain conditions combined at the right time.There is still plenty of scope for a drop in demand which would mitigate against the case for hyperinflation
19. jack c said...
UT & Reaper, thanks for your comments – much appreciated. If the predicted interest rate cuts appear as anticipated in 2008 then we will almost certainly have the agenda mentioned in my previous post. Tough times ahead whichever way it eventually pans out.
20. denzil said...
Jack.
I pretty much agree with the argument that inflation will erode debt and I'm sure it will but that scenario is only applicable if asset values such as property do not run away with the fairies when given the signal that inflation is taking hold. Inflating out of trouble is only useful for "current" debt and has little benefit for todays school leavers unless of course HPI stands still wages rise by 10% pa.
Another point too is that I'm not sure of the governments appetite to let the inflation genie out of the box. Being cynical it probably depends on how much Brown wants to win the next election because wage inflation will certainly create a feelgood factor.
21. mrmickey said...
Using inflation to erode the debt away will only work if we can all negotiate 10% pay awards each year for the next ten years, that will never happen the jobs will just go abroad unless of course we can all get a jobs in the public sector but then at the end of it all the country will resemble the old USSR with everybody working for the state and a crushed economy.