Inflation Falls To 2.2%

[opt_out]

According to Absolute Radio news bulletin, this is bad news for pensioners and benefit claimants as their payments go up with cpi.

[FreeTrader]

Even though the point of a target is to average it over time, not hit it in a moment of time. So instead of being circa 116.0, where we would be at compounding at 2% since 2005, we are 50% over at 123.5.

Yeah, Merv's record ain't so good.

He noted in his recent speech that:

"During the past twenty years, annual consumer price inflation in this country has averaged 2.1%, remarkably close to the 2% target..."

...and yet neglected to mention that during his tenure the average has been 2.72% so far. A 5.1% rise in CPI between now and his retirement next year (unlikely, but not out of the question) would see him suffer the ignominy of presiding over a >3% annual inflation average whilst Governor.

Still, I suppose he'd just shrug his shoulders and say: "Not my fault – it was oil wot done it."

[justthisbloke]

That seems just the ticket.

Can't seem to find the current level quoted anywhere though.

I can't find it on the ONS website but did track down this:

http://timetric.com/index/tax-and-prices-index-tpi-uk-monthly-ons/

[Sour Mash]

on sky news now,

going to have to do some QE to control it..??

Absolutely - spin up the presses Merv in case CPI ever falls back to target.

[JaneTracy]

For those wondering what the impact was of last year's utility price rises falling out of the annual numbers it is below.

So an improvement in both measures but if we look at why we see something troubling if we consider the announced rises in many utility bills.

By far the largest downward pressure to the change in the RPI came as a result of September 2011’s utility bill rises falling out of the index calculation

It was also a strong influence in the fall of the CPI and was a downward influence of approximately 0.4%.

http://notayesmanseconomics.wordpress.com/

I note that all other things being equal rises in inflation are expected from now on.

October will be harder

If we look at the figures for last year we see that the “base effect” I have just discussed will fall away as the month on month increase was only 0.1% as opposed to the 0.6% for September. Added to this we know that there will be some upward pressure of which so far this month we have seen some evidence in the petrol and diesel prices I quoted above. Also there will be an impact from the rise in university tuition fees.

[campervanman]

September's rate is used to set the rise in benefits the following April. Sothis convenient dip has saved the government a bunch of money.

Normal service will be resumed next month. The whole of the next year is going to be inflationary with fuel and food prices set to rocket.

September 2011 saw big increases in Gas and Electricity, this year they will arrive in October.

[Self Employed Youth]

According to Absolute Radio news bulletin, this is bad news for pensioners and benefit claimants as their payments go up with cpi.

Aye, my housing benefit will go up yet again above inflation and take an even bigger share of my income yet again.

[Hail the Tripod]

I can't find it on the ONS website but did track down this:

http://timetric.com/index/tax-and-prices-index-tpi-uk-monthly-ons/

Cheers. Looks like it is averaging somewhere between 3 and 4 percent fairly consistently over 25 years.

[Kilham]

September 2011 saw big increases in Gas and Electricity, this year they will arrive in October.

They won't be able to use that trick next year, unless they change to the month forward to calculate the increase. They may get a few years out of that though explaining their reasoning may be fun when they reach April.

Edit for typo.

Edited October 16, 2012 by Kilham

[zugzwang]

Cheers. Looks like it is averaging somewhere between 3 and 4 percent fairly consistently over 25 years.

Except for the Deflationary Epoch i.e. from October to December 2008, when Mervo T. Clown went pop-eyed with fear and started jabbering incoherently about the end of the world...

[Ash4781]

A key month as provides the likely percentage to uprate benefits. Also rpi provider likely business rates increase.

[R K]

Even though the point of a target is to average it over time, not hit it in a moment of time. So instead of being circa 116.0, where we would be at compounding at 2% since 2005, we are 50% over at 123.5.

Considering oil had an incredible rollercoaster ride up to $147, down to $35, back up over $100, back to $70s, we've had VAT up and down, depression level unemployment across half of Europe, the biggest financial crisis ever and so on I'm quite amazed that CPI is drifting back to Merv's target.

I know the hyperinflationists and Sentance and those clowns hate to admit it, but they're very badly wrong.

Astoundingly benign inflation compared to anything throughout all our lives.

[OnlyMe]

Considering oil had an incredible rollercoaster ride up to $147, down to $35, back up over $100, back to $70s, we've had VAT up and down, depression level unemployment across half of Europe, the biggest financial crisis ever and so on I'm quite amazed that CPI is drifting back to Merv's target.

I know the hyperinflationists and Sentance and those clowns hate to admit it, but they're very badly wrong.

Astoundingly benign inflation compared to anything throughout all our lives.

Only if you are buying shit.

Talked to a developer last week, it is not a question of how much materials and finished goods go up each year any more, but how many times they go up throughout the year.

[Democorruptcy]

Considering oil had an incredible rollercoaster ride up to $147, down to $35, back up over $100, back to $70s, we've had VAT up and down, depression level unemployment across half of Europe, the biggest financial crisis ever and so on I'm quite amazed that CPI is drifting back to Merv's target.

I know the hyperinflationists and Sentance and those clowns hate to admit it, but they're very badly wrong.

Astoundingly benign inflation compared to anything throughout all our lives.

What about the main living cost?

[zugzwang]

Considering oil had an incredible rollercoaster ride up to $147, down to $35, back up over $100, back to $70s, we've had VAT up and down, depression level unemployment across half of Europe, the biggest financial crisis ever and so on I'm quite amazed that CPI is drifting back to Merv's target.

I know the hyperinflationists and Sentance and those clowns hate to admit it, but they're very badly wrong.

Astoundingly benign inflation compared to anything throughout all our lives.

As you're one of the more credible posters on here, I'm amazed that you're amazed! Energy spikes are deflationary. Unemployment is deflationary. The bursting of Ponzi-inflated asset bubbles is deflationary! The experience of Japan suggests that QE is ultimately self-defeating, hence disinflationary... at best.

The central bankers may have produced $9 trillion or so of fictitious capital since the onset of the GFC but it's hardly slowed the collapse. What will they try next?

The hyperinflationists have been wrong so far, granted, but truthfully the game's barely begun yet.

[OnlyMe]

As you're one of the more credible posters on here, I'm amazed that you're amazed! Energy spikes are deflationary. Unemployment is deflationary. The bursting of Ponzi-inflated asset bubbles is deflationary! The experience of Japan suggests that QE is ultimately self-defeating, hence disinflationary... at best.

The central bankers may have produced $9 trillion or so of fictitious capital since the onset of the GFC but it's hardly slowed the collapse. What will they try next?

The hyperinflationists have been wrong so far, granted, but truthfully the game's barely begun yet.

QE -> inflation and yes the infaltion is certainly demand destructive. It can also be supply destructive as it no longer becomes worthwhile to take the risk or suck up the costs.

That is one of the reasons for shortages during hyperinflationary busts - the producer base gets financially crippled by the increasing costs - faster than they can plan / raise their own prices.

[OnlyMe]

The corporate sector is gaming the tax system, pumping up their profits somewhat and offsetting costs which are crippling other smaller competitors. Employment generation comes form small business in growth phase, the small business sector is not going to grow, see below.

All I see of the small business sector (albeit limited) is companies running to keep still, most of their efforts eaten up by rising costs.

http://www.smallbusiness.co.uk/channels/small-business-finance/news/2128223/rising-costs-for-small-companies-could-cause-winter-of-discontent.thtml

Rising costs for small companies could cause 'winter of discontent'

Oct 16 2012

Costs are threatening to spiral out of control "Costs are threatening to spiral out of control"

Business costs are rising faster for small operators than for larger businesses, research finds.

Some 95 per cent of businesses have seen an overall increase in their business costs during the year, according to research from the Forum of Private Business.

But while annual inflation has dropped from around 5 per cent to 3 per cent, the study also finds small business inflation running at 6.7 per cent, meaning prices have risen far faster for micro, small and medium-sized businesses than for the rest of the UK.

Specifically, 85 per cent of businesses report an increase in energy costs, 88 per cent in transport costs, 82 per cent a rise in marketing costs, and 73 per cent a rise in the cost of raw materials/stock.

[silver surfer]

The hyperinflationists have been wrong so far, granted, but truthfully the game's barely begun yet.

The game's five years old, and the hyperinflationists we're shrieking "Zimbabwe" before the queues had formed outside the Northern Rock.

Edited October 16, 2012 by silver surfer

[gadget]

Lots of people on here refuse to accept facts that don't fit with their world view.

Inflation is low, accept it.

I was randomly looking at my amazon purchases from 5, 6, 7, years ago and am amazed how much i spent on eg a not very good digital camera.

I bought some jeans a few weeks ago for less than it cost me 10 years ago (same jeans in the same shop, when it comes to clothes i'm a creature of habit)

Prices of some stuff goes up, other stuff goes down.

People may have a point that prices of "essentials" goes up whilst other stuff goes down, but frankly a minority of my spending goes on "essentials". For some "essentials" like petrol my spending is near enough zero.

Edited October 16, 2012 by gadget

[OnlyMe]

Lots of people on here refuse to accept facts that don't fit with their world view.

Inflation is low, accept it.

Better go and tell all those businesses out there like the ones in the article I linked.

Better be careful how you go though, they may not take your message with much goodwill.

[silver surfer]

Lots of people on here refuse to accept facts that don't fit with their world view.

Inflation is low, accept it.

I was randomly looking at my amazon purchases from 5, 6, 7, years ago and am amazed how much i spent on eg a not very good digital camera.

I bought some jeans a few weeks ago for less than it cost me 10 years ago (same jeans in the same shop, when it comes to clothes i'm a creature of habit)

Prices of some stuff goes up, other stuff goes down.

People may have a point that prices of "essentials" goes up whilst other stuff goes down, but frankly a minority of my spending goes on "essentials". For some "essentials" like petrol my spending is near enough zero.

In essence I'm with you, but I think we also have to recognise that everyone has their own personal inflation rate depending on their spending habits, and some groups like pensioners who spend a high percentage of their income on basic food and heating, are experiencing distressingly higher rates of inflation.

Edited October 16, 2012 by silver surfer

[FreeTrader]

I know the hyperinflationists and Sentance and those clowns hate to admit it, but they're very badly wrong.

Astoundingly benign inflation compared to anything throughout all our lives.

Lots of people on here refuse to accept facts that don't fit with their world view.

Inflation is low, accept it.

Hmm, I think I must be an exception.

No one is ever going to persuade me that an average inflation rate that results in a 25% loss of purchasing power over a single decade is 'low'.

I must admit I'm getting weary of the hyperinflation straw man that is constantly brought up on this site.

You don't need hyperinflation. 3% will kill you soon enough if your income isn't rising.

Edit: missed word.

Edited October 16, 2012 by FreeTrader

[Executive Sadman]

There should be a law saying it must be expressed as 'decelerates to 2.2%'

Why use a word that can be misleading when a far more descriptive one is already available.

fkin BBC

[okaycuckoo]

QE -> inflation and yes the infaltion is certainly demand destructive. It can also be supply destructive as it no longer becomes worthwhile to take the risk or suck up the costs.

That is one of the reasons for shortages during hyperinflationary busts - the producer base gets financially crippled by the increasing costs - faster than they can plan / raise their own prices.

Maybe not. I understand the point, but it needs evidence.

Plenty of people keep working despite the notion that work doesn't pay compared to welfare. My view is welfare is better if you're willing to make choices that would make you worse off. Wot?

As for commodities? I have an ETF you can buy. Commission, of course.

[OnlyMe]

Maybe not. I understand the point, but it needs evidence.

Plenty of people keep working despite the notion that work doesn't pay compared to welfare. My view is welfare is better if you're willing to make choices that would make you worse off. Wot?

As for commodities? I have an ETF you can buy. Commission, of course.

It starts off with the marginal work, short term or small jobs - a trade is a typical example - drive to quote for job, quote, get materials, drive back to do job. Every element of time / input (material or travel, wear and tear) is a cost. Will the customer stump up all those costs for a small job with a margin on top to make it worthwhile or not? From the people I know in the trade they are trying to pick just the best jobs - longer ones with with clients with budgets. Twas ever thus you'd say, well not quite as the smaller jobs are becoming so marginal that they are not necessarily useful infill or even economic to do - when it comes to that I've seen examples of that, down tools and stop working is one of them, switching jobs completely is another.

A lot of mathematical and engineering analysis can be resolved by taking extreme limits of the variables involved. For any business if your material inputs are taken to the extreme limits it is quite obvious that actually manufacturing and selling any goods becomes difficult/impossible as each passed on rise limits further potenital sales or erodes existing margin (if there is any left).

As for inflation here are the official stats since 2007, I believe even these stats are manipulatedd to buggery and not representative.

Food up 28.7% since August 2007.

Electricity, gas and other fuels - 45.5%

Transport - 25%

http://www.guardian.co.uk/commentisfree/2012/aug/14/inflation-commute-5000-editorial

Average weekly pay up 10%.