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Inflation On The Rise

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http://www.theage.com.au/news/business/inf...9074147255.html

"Inflation is on the rise, as the high cost of petrol continues to hurt consumers, and could prompt the central bank to hike interest rates by the middle of this year, a new survey shows.

The latest TD Securities-Melbourne Institute inflation gauge showed prices of consumer goods and services rose by 0.7 per cent in January, following a 0.1 per cent rise in December."

We (or Stephen Nickell) think we've got inflation under control - My Prediction - a surprise rise in January. Why you may ask when the economy is so subdued?

I think there is a greater lag in oil price changes feeding through to inflation then there used to be - yes there doesn't appear to be a wage/price spiral yet, but:

Many contracts between suppliers and large manufacturers are done at the start of the year. But these manufacturers are no longer in the UK - and each manufacturer will use parts which may have been made some months before. So I am asserting that the lag will have been longer than in the past.

So higher inflation which must be followed by higher interest rates, which will be followed by recession, falling employment and you've guessed it falling house prices

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I think there is a greater lag in oil price changes feeding through to inflation then there used to be - yes there doesn't appear to be a wage/price spiral yet, but:

It seems amazing the public have been fooled for so long with Gordons inflation figures-

Surely they have to sit up and take notice if British Gas dont get pressured out of increasing everyones energy bills by 25% this month ?!?

This following article crystalised for me thats its not so much the energy (and other commodity) prices rising - so much as the pound (or dollars) in our pockets is being devalued at a horrendous rate while they try to print their way out of this mess. - If it weren't for the fact that billions of Chinese are happy (ok maybe wrong choice of word) to work for a few cents an hour I'd guess CPI would be running *way* ahead of 10%

http://www.kitcocasey.com/displayArticle.php?id=525

Edited by Flick

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This following article crystalised for me thats its not so much the energy (and other commodity) prices rising - so much as the pound (or dollars) in our pockets is being devalued at a horrendous rate

Exactly. What do you think happens when over a hundred billion pounds of new money is created every year?

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This following article crystalised for me thats its not so much the energy (and other commodity) prices rising - so much as the pound (or dollars) in our pockets is being devalued at a horrendous rate while they try to print their way out of this mess.

http://www.kitcocasey.com/displayArticle.php?id=525

You are absolutely spot on. I speak to people who work for Opec and they have hinted to me that Opec is thinking along the same lines. That is why they are bullish about demand growth even with oil at over $60/bl. Although funnily enough the ministers are very reluctant to come out and say it in public. They will talk about the dollar being weaker against the Euro etc but not about money itself being worth less. It's one of those sacred cows amongst the political elite I guess.

Great article, anyway.

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wait till things change (deflation starting with house prices) prices are going down next year, due to displacement effects.

Well I'm glad you can say that with such certainty :)

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...

We (or Stephen Nickell) think we've got inflation under control - My Prediction - a surprise rise in January. Why you may ask when the economy is so subdued?

...

A suprise rise could well be on the cards. There is a .12% rise due from petrol prices in January. The remainder will be driven by the retailers. In Jan 05 both the clothing/footware and furniture categories dropped 4%. Furniture recovered in price through the year. Clothing never did, 2005 was like one big clothing sale. If that's not repeated this month, or indeed this year, then the inflation figures will be much higher than expected. Also, food prices begain trending upwards in October last year, which I don't think is seasonal. If that continues inflation will be higher than expected.

This is all excluding the possible large effect of energy price increases (.65% if gas and electricity rise 25% across the board).

T&T

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A suprise rise could well be on the cards. There is a .12% rise due from petrol prices in January. The remainder will be driven by the retailers. In Jan 05 both the clothing/footware and furniture categories dropped 4%. Furniture recovered in price through the year. Clothing never did, 2005 was like one big clothing sale. If that's not repeated this month, or indeed this year, then the inflation figures will be much higher than expected. Also, food prices begain trending upwards in October last year, which I don't think is seasonal. If that continues inflation will be higher than expected.

This is all excluding the possible large effect of energy price increases (.65% if gas and electricity rise 25% across the board).

T&T

When are the inflation figures due to be released? Frankly if inflation does not rear its ugly head this year and interest rates don't rise its game over for me. My wife wants her own house and after we sell my father's house (who unfortunately died before Christmas and has left it between me, my brother and my son) we shall have a fairly hefty deposit.

I'll let everyone know how that sale goes - we had 3 valuations - 365,375 and 435! So obviously we are on with the EA(its going on this week) with the 435 valuation - the longer we don't sell it the longer I can delay buying a house - so if it has been overvalued then it suits me fine. My brother will take a lot of convincing to drop the price if we don't get any offers in the first month or so.

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A whole page in today's FT is dedicated to the issue of consumer spending and inflation.

The article describes how utility bills, council tax, insurance, mortgage repayments, public transport etc. have all increased by amounts above inflation.

But it was the headline that made me smile - "How the costs of everyday living have outpaced inflation".

Surely, if the inflation figures are calculated correctly, they should be an accurate reflection of "the costs of everyday living". All this shows to us is that the inflation figures that we are fed are simply wrong and are actually much higher.

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A whole page in today's FT is dedicated to the issue of consumer spending and inflation.

The article describes how utility bills, council tax, insurance, mortgage repayments, public transport etc. have all increased by amounts above inflation.

But it was the headline that made me smile - "How the costs of everyday living have outpaced inflation".

Surely, if the inflation figures are calculated correctly, they should be an accurate reflection of "the costs of everyday living". All this shows to us is that the inflation figures that we are fed are simply wrong and are actually much higher.

I've said it before. No matter how much they under measure inflation - there is no hiding place for true inflation, since people feel it for real in their pockets, and curb their spending appropriately.

Fiddling the figures is only a short-term game, and it's now over.

WTF? :blink:

Is there a fancy name for a statement like that?

Had it been intentionally so, it would be quite clever Irony.

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Surely, if the inflation figures are calculated correctly, they should be an accurate reflection of "the costs of everyday living". All this shows to us is that the inflation figures that we are fed are simply wrong and are actually much higher.

You will learn to trust and love Big Brother.

:)

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Surely, if the inflation figures are calculated correctly, they should be an accurate reflection of "the costs of everyday living". All this shows to us is that the inflation figures that we are fed are simply wrong and are actually much higher.

Yes, but if inflation figures were calculated accurately so as to reflect the cost of everyday living then inflation would be sky-high and 'Crash Gordon' would have egg on his face, and we wouldn't want that, would we?

And what I don't get is this...

The MPC uses interest rates to control inflation so soaring energy costs will push inflation up, and inevitably, interest rates too. But consumers have no control over energy costs and have already cut back other spending significantly, so what will the MPC actually achieve by putting up interest rates in response to inflation caused by energy price rises other than to further turn the screws on the poorest and most over-stretched people? It's hardly going to make people buy less petrol and gas when they still need to get to work and heat their homes, so what, excactly, is it going to achieve?

Edited by Bingley Bloke

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If it weren't for the fact that billions of Chinese are happy (ok maybe wrong choice of word) to work for a few cents an hour I'd guess CPI would be running *way* ahead of 10%

There was a program on the other day about Chinese workers – and they are not happy, the companies are forced to give 8% pay rises every year as they loose 1/3 of there staff. The young girl workers work in sweatshops to earn some cash before going home to the farm to get married. But on a object like a compressor what is 8% on top of £10 – it’s the shops here that have the mark up

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And what I don't get is this...

The MPC uses interest rates to control inflation so soaring energy costs will push inflation up, and inevitably, interest rates too. But consumers have no control over energy costs and have already cut back other spending significantly, so what will the MPC actually achieve by putting up interest rates in response to inflation caused by energy price rises other than to further turn the screws on the poorest and most over-stretched people? It's hardly going to make people buy less petrol and gas when they still need to get to work and heat their homes, so what, excactly, is it going to achieve?

I guess that is because inflation caused by raw materials prices and by wage rises are two different things.

Interest rates are normally raised to reduce money supply and to try keep a lid on inflation. However, if the treasury allows inflation to rise, but massages the figures so that it doesn't appear, the government won't have to increase the pay of millions of workers who have their salaries linked to inflation. Therefore they can actually get away with paying those workers less in real terms. And, if the government can convince the markets the same, they can continue to borrow money at lower real interest rates. The US Fed is playing the same game and even no longer publishes key money supply figures. However, not everyone is fooled, hence the performance of gold over the last two years.

Edited by Flash

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A suprise rise could well be on the cards. There is a .12% rise due from petrol prices in January. The remainder will be driven by the retailers. In Jan 05 both the clothing/footware and furniture categories dropped 4%. Furniture recovered in price through the year. Clothing never did, 2005 was like one big clothing sale. If that's not repeated this month, or indeed this year, then the inflation figures will be much higher than expected. Also, food prices begain trending upwards in October last year, which I don't think is seasonal. If that continues inflation will be higher than expected.

This is all excluding the possible large effect of energy price increases (.65% if gas and electricity rise 25% across the board).

T&T

The articles I read talked about the 25% rise taking the average household bill to £1000 i.e. a £200 increase. How does this only represent a 0.65% rise in costs for an average household?

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The CPI figure makes it easier for your boss to say "Tough $hit Mat£y, that's all you're getting this year" when you ask for a pay rise.

Yup - absolutely. We're about to release our year end results....I suspect they'll be somewhere between 13 & 16% CER growth.

Our average pay rise? 2.5% - makes us all glad we work so hard.

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I guess that is because inflation caused by raw materials prices and by wage rises are two different things.

Yes. Its called stagflation.

Raising rates will protect sterling and reduce aggregate demand thus addressing the rising prices.

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T&T

The articles I read talked about the 25% rise taking the average household bill to £1000 i.e. a £200 increase. How does this only represent a 0.65% rise in costs for an average household?

Seems about right to me. If an average household has expenditure of about 30k, a £200 increase would add about .65%

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Go join Gordon's Army and get nearly 10%

http://news.bbc.co.uk/1/hi/education/4687030.stm

Buckers

Buckers,

Touch disingenuous of you there. The article you link suggests that graduate starting salaries in the public sector will increase by that amount (though this surprises me!). But public sector starting salaries are still considerably below the 23,000 average starting salary quoted in the article. I'm not passing comment on that, just trying to get the facts straight.

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  • 339 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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