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U.K. Economy Unexpectedly Shrinks for First Time Since 2012

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21 hours ago, zilly said:

British people have been deceived for a long time with stats such as price inflation (doesn't include the single biggest cost a person has to meet of a putting a roof over one's head, or measure 'shrinkflation') and GDP (DOES include strangely the cost - strangely adjudged a 'product' -  of the rent you don't pay as a homeowner).

A really good question as to why the above is true to ask of your prospective MP when (s)he comes knocking IMO.

Probably won't even be aware though sadly!

 

Shrinking in weighs and measures is huge.....try to keep the price the same and give 20% less is a huge inflation in cost......butter is 250g that is why we can see the doubling in the cost over the last two years....not that long ago butter was 80p to 90p a block, now £1.60p even £1.80p.......wages are not keeping up, some low paid earners have had a drop in real terms earnings......soon the products in the £1 shop will be thimble size.😉

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19 hours ago, opt_out said:

... also very telling that politicians talk about GDP, whereas GDP per capita is what most people should care about.

I remain to be convinced that any bigger GDP number is necessarily desirable.

We could increase GDP by aranging agreements among three or more strangers to pay each other for the opportunity to be next to issue an insult directed at you.  These transactions can be recorded as administrative services - so would contribute to GDP.  If these three parties were inclined to insult you often enough, we could arbitrarily increase GDP - all without providing anything you'd consider valuable.

Similarly, if such a scheme were to be outlawed - even if you might think this would only provide advantage... it could easily be presented as a dangerous slowing of the economy.

I find it peculiar that so many people assume that all economic activity - no matter the details - is univerally and homogeneously desirable.  I believe it is silly to "care about GDP" - per capita or otherwise.  I believe we should care about honesty, decency and accountability - for example - as these are fundamental foundations for our ever-changing economy.  To consider one number in isolation (with scant care for exactly what it measures) is - in my opinion - an exercise in delusion.

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43 minutes ago, winkie said:

Shrinking in weighs and measures is huge.....try to keep the price the same and give 20% less is a huge inflation in cost......butter is 250g that is why we can see the doubling in the cost over the last two years....not that long ago butter was 80p to 90p a block, now £1.60p even £1.80p.......wages are not keeping up, some low paid earners have had a drop in real terms earnings......soon the products in the £1 shop will be thimble size.😉

I recognise your observation about butter... Every time I see the butter, in the dairy section, I always think "coo, that's pricey."  Conversely, I've not seen the same thing happen with milk or cream... and I've noticed the price of Brie has fallen... a basic, bland, 200G slice (which I remember as costing £1.50-£1.90 a few years ago) now comes in at 79p - which is cheaper than I ever remember.

I think this points at factors influencing the price of foods other than generic 'inflation'.  A while ago, on the radio, a Welsh sheep farmer was lamenting the impact of Brexit uncertainty... because he felt he needed to sell his produce in other EU countries - and that there will be no market, there, for his product if the EU apply a large import duty.  On hearing this, my thoughts immediately turned to Shepards Pie (which I far prefer to Cottage pie) and realising that while I've intended to buy some minced lamb (if I see it at the supermarket) for several months - it's been years since I've made Shepard's Pie.  Am I a peculiar UK resident for liking lamb?  Is Welsh lamb really only sought-after in continental Europe?  Given the (alleged) worry about shortages of imported food after Brexit... surely this presents a golden opportunity to market a premium product, with low food-miles, to a domestic market and reap the efficiency benefits?

P.S. I notied that a significant proportion of products in PoundLand now cost £2 or more... but - fear not - a huge range of comparable cheap tat can now be acquired for a single veritable pound - including internaitional delivery from Hong Kong - from other vendors.

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16 hours ago, Ghostly said:

It's so unexpected.

Yeah, it's nonsense isn't it?  I think this was not at all unexpected, given 1) stock piling for a March brexit, 2) the global slowdown/trade war 3) a new government whose central assumption as that we will have a no-deal Brexit in October.

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On 10/08/2019 at 10:46, A.steve said:

I recognise your observation about butter... Every time I see the butter, in the dairy section, I always think "coo, that's pricey."  Conversely, I've not seen the same thing happen with milk or cream... and I've noticed the price of Brie has fallen... a basic, bland, 200G slice (which I remember as costing £1.50-£1.90 a few years ago) now comes in at 79p - which is cheaper than I ever remember.

I think this points at factors influencing the price of foods other than generic 'inflation'.  A while ago, on the radio, a Welsh sheep farmer was lamenting the impact of Brexit uncertainty... because he felt he needed to sell his produce in other EU countries - and that there will be no market, there, for his product if the EU apply a large import duty.  On hearing this, my thoughts immediately turned to Shepards Pie (which I far prefer to Cottage pie) and realising that while I've intended to buy some minced lamb (if I see it at the supermarket) for several months - it's been years since I've made Shepard's Pie.  Am I a peculiar UK resident for liking lamb?  Is Welsh lamb really only sought-after in continental Europe?  Given the (alleged) worry about shortages of imported food after Brexit... surely this presents a golden opportunity to market a premium product, with low food-miles, to a domestic market and reap the efficiency benefits?

P.S. I notied that a significant proportion of products in PoundLand now cost £2 or more... but - fear not - a huge range of comparable cheap tat can now be acquired for a single veritable pound - including internaitional delivery from Hong Kong - from other vendors.

Butter is expensive because there is a high demand, lower supply.....manufacturers get a better price from exporting it, travels well, China getting the taste for it?.....that cheap brie often tastes like chalk......cheese should be around £5 to £6 a kilo, can get a very good mature cheddar cheese for about that price......some shops sell the same for 20%+ mark up....certain basic foods that families buy every week will entice them to the shop that offers quality food for excellent value for money, buy the basics and spend extra on the extras......I know the best shop to buy the best value  butter and cheese, they have my custom for most of the rest of my shop....win,win.......home grown lamb is excellent, although seasonal.....can make a v.good Sheppard's pie from the left overs from a joint.....two meals from one....lamb is imported from both New Zealand and Australia.....lots of air/boat miles....sold all over Europe.

Pound shops very often sell stuff for £1 that can buy for 50p or 75p in other shops, all is not of value....and £2 is not a pound shop, in Europe it is called the €2 shop......now almost £2 shop.;)

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On ‎09‎/‎08‎/‎2019 at 20:54, Bluestone59 said:

Why is the cost of doughnuts even in the shrinkflation index in the first place?

I don't eat them and I don't know and never have known anybody who does other than my Mrs

...

Cut out the c*ap and leave rail fares, gas and electric, second hand cars (good ones), a selection of everyday foods and entertainment venues during school holidays and you'd probably find it's 40% in the last three years.

The RPI/CPI can't possibly include every single item that UK consumers buy so they use example goods - in this case there's nothing special about doughnuts, they're just an example of a cake that's widely sold, eaten in roughly the same quantities all year round and easy to find price comparators.

The RPI/CPI will NEVER be representative for most people, because you're trying to average purchases of people across their whole lives: for example, you mention rail fares - my rural-living family never use a train.  You mention school holiday entertainment - no-one in my family has school age children, so that's not relevant to us either.  You might be right about those things going up more - I wouldn't know.  But actually RPI/CPI needs to take in account ALL spending across the economy, not just essentials (people fritter away a LOT of money on non-essentials, so their prices matter) and not just what someone in one particular part of the country or stage of life spends their money on.

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Buy or gifted what others don't want or don't see as useful......then add value to it......people have the power to create their own inflation and deflation.😉

 

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9 hours ago, scottbeard said:

The RPI/CPI can't possibly include every single item that UK consumers buy so they use example goods - in this case there's nothing special about doughnuts, they're just an example of a cake that's widely sold, eaten in roughly the same quantities all year round and easy to find price comparators.

The RPI/CPI will NEVER be representative for most people, because you're trying to average purchases of people across their whole lives: for example, you mention rail fares - my rural-living family never use a train.  You mention school holiday entertainment - no-one in my family has school age children, so that's not relevant to us either.  You might be right about those things going up more - I wouldn't know.  But actually RPI/CPI needs to take in account ALL spending across the economy, not just essentials (people fritter away a LOT of money on non-essentials, so their prices matter) and not just what someone in one particular part of the country or stage of life spends their money on.

Yes, except that politicians cannot be trusted which was why I gave examples of essentials or quasi essentials which would be likely to show a very high level of inflation. I didn't intend to suggest they should be the only constituents of an inflation index. House ownership is not essential to survival and isn't/wasn't in the index, rents however traditionally were. That may make some sense. It's also highly convenient for a government determined to make houses as expensive to buy as possible.

The problems of putting together a realistic index are real and are well illustrated in your post.

You did though lean towards non essentials. The indices are likely to be used to calculate increase in benefit payments which then leads to the question how many and how much of non essentials should be funded by public noney. A colleague said to me today that he thought if you presented yourself to a food bank and admitted to being a smoker you should be denied access to its wares but the right hon John Reid once said "let the poor smoke."

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56 minutes ago, Bluestone59 said:

Yes, except that politicians cannot be trusted which was why I gave examples of essentials or quasi essentials which would be likely to show a very high level of inflation. I didn't intend to suggest they should be the only constituents of an inflation index. House ownership is not essential to survival and isn't/wasn't in the index, rents however traditionally were. That may make some sense. It's also highly convenient for a government determined to make houses as expensive to buy as possible.

The problems of putting together a realistic index are real and are well illustrated in your post.

You did though lean towards non essentials. The indices are likely to be used to calculate increase in benefit payments which then leads to the question how many and how much of non essentials should be funded by public noney. A colleague said to me today that he thought if you presented yourself to a food bank and admitted to being a smoker you should be denied access to its wares but the right hon John Reid once said "let the poor smoke."

What portion of your income do you spend on 'essentials'? At a rough estimate of take home pay for me; 25% rent, 15% bills (CTax, Electric, Water, Internet, Phone, Insurance), maybe another 10% on food (and I'm not subsisting on beans on toast), so at least half my income goes on savings or 'non-essentials'. Now maybe I'm atypical, but a lot of people I know probably have similar if not greater levels of spending on 'stuff'.

CPI/RPI are also used for everything from wage bargaining, pension indexing etc so it's not just those on benefits whose incomes are determined by it. In general the actual minimum wage has been going up faster than inflation for those whose wage is linked to that.

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CPI(H) includes house price index.  Look at the chart in this report you've never had it so good.  Not since 2004 anyhow.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

The EU inflation measure, CPI, is generally lower than our traditional RPI.  I guess you could correct the CPI(H) figures to make up an RPI(H) plot if you had time.

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2 hours ago, kzb said:

CPI(H) includes house price index.  Look at the chart in this report you've never had it so good.  Not since 2004 anyhow.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

The EU inflation measure, CPI, is generally lower than our traditional RPI.  I guess you could correct the CPI(H) figures to make up an RPI(H) plot if you had time.

You could, but RPI is widely discredited as a statistical measure, and is only kept going because index-linked gilt payouts are linked to it - so CPI and CPI(H) are probably more meaningful.

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26 minutes ago, scottbeard said:

You could, but RPI is widely discredited as a statistical measure, and is only kept going because index-linked gilt payouts are linked to it - so CPI and CPI(H) are probably more meaningful.

In my circles CPI is more discredited (excuse the grammar) than RPI.  I thought this belief was standard.

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This is copied straight from Wikipedia.  AEI is the Average Earnings Index

 

UKinflation.png

 

You can see why CPI is distrusted, it comes out lower than RPI (RPI(X) on the plot is RPI but excluding mortgage interest changes).  Also it is less comprehensive:

The RPI includes an element of housing costs, whereas the following items are not included in the CPI: Council tax, mortgage interest payments, house depreciation, buildings insurance, ground rent, solar PV feed in tariffs and other house purchase cost such as estate agents' and conveyancing fees.

 

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1 hour ago, kzb said:

In my circles CPI is more discredited (excuse the grammar) than RPI.  I thought this belief was standard.

The ONS view is very, very strongly that RPI is inappropriate to use: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/shortcomingsoftheretailpricesindexasameasureofinflation/2018-03-08

Quote

Overall, RPI is a very poor measure of general inflation, at times greatly overestimating and at other times underestimating changes in prices and how these changes are experienced.  In 2013, the RPI lost its status as a National Statistic. Our position on the RPI is clear: we do not think it is a good measure of inflation and discourage its use.

Yes RPI will produce a higher value than CPI, but that's not because it's better - quite the reverse, it's just down to the maths behind the formula, which in the RPI has an upward bias that CPI doesn't (in other words, if RPI was 100, then prices all rose 10%, RPI would become 110, but if they fell back to their previous level RPI would NOT fall back to 100 because of the rubbish maths it uses).

And yes CPI doesn't include housing costs - but that's why CPIH is published, which does.

If you want a measure of inflation in buying household stuff then CPI is best, and if you also want to include housing costs CPIH is best.  RPI isn't best for anything (unless you just want a bigger number!)

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1 hour ago, scottbeard said:

The ONS view is very, very strongly that RPI is inappropriate to use: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/shortcomingsoftheretailpricesindexasameasureofinflation/2018-03-08

Yes RPI will produce a higher value than CPI, but that's not because it's better - quite the reverse, it's just down to the maths behind the formula, which in the RPI has an upward bias that CPI doesn't (in other words, if RPI was 100, then prices all rose 10%, RPI would become 110, but if they fell back to their previous level RPI would NOT fall back to 100 because of the rubbish maths it uses).

And yes CPI doesn't include housing costs - but that's why CPIH is published, which does.

If you want a measure of inflation in buying household stuff then CPI is best, and if you also want to include housing costs CPIH is best.  RPI isn't best for anything (unless you just want a bigger number!)

Depends how you look at it. 

Year 0 something costs £100

Year 1: £100 to £110 is +10.00% inflation.

Year 2: £110 to £100 is -9.09% inflation (deflation)

Buying 3 items, one each year, I have spent £310 which is actually 3.33% increase over the 3 years.  My income would have to rise by 1.1% per annum for the 3 years to stay in the same place. 

But I accept the real reason is that peoples' experience of real world inflation is that it is higher than government statistics, so anything that decreases it looks like a fiddle.

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8 hours ago, kzb said:

But I accept the real reason is that peoples' experience of real world inflation is that it is higher than government statistics, so anything that decreases it looks like a fiddle.

No-one's expenditure will be EXACTLY like the RPI/CPI basket of course, because whilst on AVERAGE we all drink X pints of lager a week and buy Y tins of baby food, any individual won't reproduce that spending pattern exactly.  In particular, recently necessities have increased in price faster than luxuries, meaning the poorer households (who spend more on necessities) will also have genuinely seen rises higher than the index.  They experience inflation higher than the index - but not because the index is "wrong" but because they are the wrong side of the average.

In other cases though, it can be because people just aren't very good at tracking price data scientifically in their heads.  People notice price rises more than they notice price stability, for example - eg if a product goes up from £100 to £110 most people will cry "what?  that's 10%! and yet the government try to tell me inflation is only 2.5%! they're lying!" missing that the £100 price has been held flat for the last three years, and that 100,100,100,110 is actually a rate of inflation on average over the period of 2.4%pa. etc

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8 hours ago, scottbeard said:

No-one's expenditure will be EXACTLY like the RPI/CPI basket of course, because whilst on AVERAGE we all drink X pints of lager a week and buy Y tins of baby food, any individual won't reproduce that spending pattern exactly.  In particular, recently necessities have increased in price faster than luxuries, meaning the poorer households (who spend more on necessities) will also have genuinely seen rises higher than the index.  They experience inflation higher than the index - but not because the index is "wrong" but because they are the wrong side of the average.

In other cases though, it can be because people just aren't very good at tracking price data scientifically in their heads.  People notice price rises more than they notice price stability, for example - eg if a product goes up from £100 to £110 most people will cry "what?  that's 10%! and yet the government try to tell me inflation is only 2.5%! they're lying!" missing that the £100 price has been held flat for the last three years, and that 100,100,100,110 is actually a rate of inflation on average over the period of 2.4%pa. etc

Just been announced rail fares are going up  with RPI again.  Not CPI or CPI(H), but by the upwards-biased and completely discredited RPI.

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59 minutes ago, kzb said:

Just been announced rail fares are going up  with RPI again.  Not CPI or CPI(H), but by the upwards-biased and completely discredited RPI.

Your point being what....?

They clearly just use RPI because it allows them to take in more money.  That's a completely different point to everything I said above.

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1 hour ago, scottbeard said:

Your point being what....?

They clearly just use RPI because it allows them to take in more money.  That's a completely different point to everything I said above.

Exactly why people don't believe the stats ! 

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12 minutes ago, kzb said:

Exactly why people don't believe the stats ! 

But by definition half of all things are bigger than average?

Selecting one of the things rising faster than average and then going "see?  that's why you shouldn't believe the average!" is like saying 5'9" can't be the average height of a UK man because your mate is 6'2"

In both cases each figure higher than the average is mathematically balanced by one lower - that's what the average is.

All of these statements can be true at the same time without that being a contradiction:
- RPI is mathematically biased higher than CPI
- Rail fares use RPI as a measure to increase prices precisely for this reason
- CPI and CPIH are better measures of overall average inflation in the UK than RPI

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13 minutes ago, scottbeard said:

But by definition half of all things are bigger than average?

Selecting one of the things rising faster than average and then going "see?  that's why you shouldn't believe the average!" is like saying 5'9" can't be the average height of a UK man because your mate is 6'2"

In both cases each figure higher than the average is mathematically balanced by one lower - that's what the average is.

All of these statements can be true at the same time without that being a contradiction:
- RPI is mathematically biased higher than CPI
- Rail fares use RPI as a measure to increase prices precisely for this reason
- CPI and CPIH are better measures of overall average inflation in the UK than RPI

OK you are right let's leave it there.

In other news, despite the GDP contraction, you've never had it so good:

  • The UK employment rate was estimated at 76.1%, the joint-highest on record since comparable records began in 1971.
  • The UK unemployment rate was estimated at 3.9%; lower than a year earlier (4.0%); on the quarter the rate was 0.1 percentage points higher.
  • The UK economic inactivity rate was estimated at 20.7%, a joint-record low.
  • Estimated annual growth in average weekly earnings for employees in Great Britain increased to 3.7% for total pay (including bonuses) and 3.9% for regular pay (excluding bonuses).
  • In real terms (after adjusting for inflation), total pay is estimated to have increased by 1.8% compared with a year earlier, and regular pay is estimated to have increased by 1.9%.

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/august2019

 

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On 11/08/2019 at 19:17, winkie said:

Butter is expensive because there is a high demand, lower supply.....manufacturers get a better price from exporting it, travels well, China getting the taste for it?.....that cheap brie often tastes like chalk......cheese should be around £5 to £6 a kilo, can get a very good mature cheddar cheese for about that price......some shops sell the same for 20%+ mark up....certain basic foods that families buy every week will entice them to the shop that offers quality food for excellent value for money, buy the basics and spend extra on the extras......I know the best shop to buy the best value  butter and cheese, they have my custom for most of the rest of my shop....win,win.......home grown lamb is excellent, although seasonal.....can make a v.good Sheppard's pie from the left overs from a joint.....two meals from one....lamb is imported from both New Zealand and Australia.....lots of air/boat miles....sold all over Europe.

Pound shops very often sell stuff for £1 that can buy for 50p or 75p in other shops, all is not of value....and £2 is not a pound shop, in Europe it is called the €2 shop......now almost £2 shop.;)

Perhaps the butter mountain debacle explains the price of butter?  When I was young, I found it extraordiary to find margerine in the fridge and endless stories about a problematic butter mountain on the news.

I think I should try chalk - if it's like cheap-o brie - but, I imagine (because this makes perfect sense) it's easiest and cheapest to have it hand-delivered, one stick at a time, from China.  It is this seeming insanity that makes me doubt every story about inflation being high, low or middling.  For about 30 years, central bank orthodoxy has been to 'target inflation'... which is quite a long time.  My favourite central banking concept is that every phiolsophy/ideology that has directed monetary policy has failed in a similar way... i.e. the real world changed in a way (if one is to be charitable) the originators of policy never anticipated - often as a consequence of those very same policies.  I characterise past failures not solely as a result of unethical/illegal activity (though this certainly plays a part) but policies that, at one time, seemed credible... now give rise to enormous (seemlingly) perverse consequences.  It feels, to me, that this is probably happening right now - as a result of absurdly low interest rates alongside incomprehensible risk models - coupled with a political change that, while it is difificult to pin down, appears to have global influence.

 

 

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8 hours ago, kzb said:

OK you are right let's leave it there.

In other news, despite the GDP contraction, you've never had it so good:

  • The UK employment rate was estimated at 76.1%, the joint-highest on record since comparable records began in 1971.
  • The UK unemployment rate was estimated at 3.9%; lower than a year earlier (4.0%); on the quarter the rate was 0.1 percentage points higher.
  • The UK economic inactivity rate was estimated at 20.7%, a joint-record low.
  • Estimated annual growth in average weekly earnings for employees in Great Britain increased to 3.7% for total pay (including bonuses) and 3.9% for regular pay (excluding bonuses).
  • In real terms (after adjusting for inflation), total pay is estimated to have increased by 1.8% compared with a year earlier, and regular pay is estimated to have increased by 1.9%.

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/august2019

 

You've never had it so good? A £2tn economy that's carrying £6tn of debt. Don't make me laugh.

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12 hours ago, zugzwang said:

You've never had it so good? A £2tn economy that's carrying £6tn of debt. Don't make me laugh.

The housing stock alone is valued at £7tn so it is all OK.

 

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  • 259 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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