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Rise In Vat Will Help Push Inflation To 4Pc

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http://www.telegraph.co.uk/finance/personalfinance/8241030/Rise-in-VAT-will-help-push-inflation-to-4pc.html

They warned the rise in Value Added Tax to 20 per cent could have a larger impact on inflation than previously expected, saying it would reach the 4 per cent threshold before the end of May.

Vicky Redwood, an economist at Capital Economics, said the rise in the cost of living “partly reflects the VAT rise”.

The Consumer Prices Index, the Government’s preferred measure of inflation, reached 3.3 per cent in November, rising from 3.2 per cent the previous month.

It follows an increase in the price of oil, gas and food and economists expect these inflationary pressures to continue.

Retailers are absorbing these additional costs and using the VAT rise to push through substantial prices increases.

Dear George

It's all your fault about inflation being above target with your VAT increase. Nothing at all to do with me.

All my love

Mystic Merv.

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Dear George

It's all your fault about inflation being above target with your VAT increase. Nothing at all to do with me.

All my love

Mystic Merv.

Someone needs to point out, VAT this year is a negative contribution to YOY rise/fall in inflation.

The introduction coincides with last year's VAT rise falling out of the YOY figure. And last year's VAT price rise was proportionally larger: 2.174% to this year's 2.128% (1.175 / 1.15 vs 1.2 / 1.175) on affected transactions.

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Someone needs to point out, VAT this year is a negative contribution to YOY rise/fall in inflation.

The introduction coincides with last year's VAT rise falling out of the YOY figure. And last year's VAT price rise was proportionally larger: 2.174% to this year's 2.128% (1.175 / 1.15 vs 1.2 / 1.175) on affected transactions.

What about next month?

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http://www.telegraph.co.uk/finance/personalfinance/8241030/Rise-in-VAT-will-help-push-inflation-to-4pc.html

Dear George

It's all your fault about inflation being above target with your VAT increase. Nothing at all to do with me.

All my love

Mystic Merv.

This likely tactic for excusing inflation was predicted here since the VAT hike was announced about six months ago.

Strange how when they were scaremongering about 'deflation' the (previous) government chose to cut VAT by 2.5% for a year. Not a peep from anyone in the BoE or government or opposition (or the bloody media who were supposed to be asking pertinent questions) about how the VAT cut was going to aggravate the supposedly imminent 'danger of deflation', huh?

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Who said anything about months? The figures they always quote are YoY.

Sigh.

What will happen to the YoY next month?

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Also the devaluation should be filtering out the figure's now. Sterling started falling Sep 2008. That the one the BOE keep rolling out. :lol:

Yes, if you discount all the things that have caused inflation then we can see that there isn't any inflation. Genius! :lol:

That's a nice simple line for the media to trot out for the (generally) fiscally retarded public - although with the increasingly obvious scale and scope of rising prices and cost of living I doubt that even our brainwashed X-factor watching public are going to be fooled for much longer.

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Sigh.

What will happen to the YoY next month?

The point is that the 2010 reversion to 17.5% VAT (from 15% in 2009) 'falls out' month by month this year.

They were happy enough to trumpet that the VAT reversion by 2.5% in 2010 to 17.5% as an excuse for pretty much the entire 2010 inflation stats but the subsequent deflating factor of it falling out of the figures will more than cancel out any inflating factor from this year's VAT hike (to 20% in 2011 from 17.5% in 2010).

But the authorities won't be pointing that out (and I doubt anyone in the mainstream media will either).

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Who said anything about months? The figures they always quote are YoY.

Inflation is calc'd in a similar way to the halifax YoY indices, the YoY figures are calculated on an annualised monthly basis so in a particular month the YoY figures will include effects of what happened in the last 23 months with the most "weighting*" being placed on what happened 12 months ago as that figure occurs the most in the calculations. (this is why the halifax index in particular gets some flack on here for doing weird things)

* this isn't a deliberate weighting as such just a side effects of the maths of errors and variation

This means we should see the most momentum in the inflation figure due to the vat increase occurring in June which is probably why the BoE fan charts seem to dip in Q3-2011 as the momentum starts to be lost. Of course those charts haven't factored in any of the other price rises that are happening in the real world!

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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