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Jimmy James

Inflation - Non-discretionary Will Be 6.8% This Year

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Lots of ranting about the inflation figures relationship to reality on HPC, here's some interesting analysis to back it up: quote from Hamish Macrae in today's Independent drawing on research from Longview Economics whose website is http://www.longvieweconomics.com/

"Two points here seem to me to be most interesting. One is the distinction between actual spending and discretionary spending. If the price of petrol goes up, you have to pay it. I suppose given time you could switch to a diesel car or buy a smaller one. But in the short run there is nothing much to be done. Ditto taxes. Ditto mortgages. Ditto odds and ends such as parking fines, which, however careful you are, are almost impossible to avoid nowadays. Even leaving such little matters as fines aside, Longview Economics calculates that inflation in these non-discretionary items will increase by 6.8 per cent this year.

So while inflation on paper remains very low, in practice for most people, it is material. If you look at real discretionary disposable income - ie what people have left to spend after paying all the bills they have to pay - this has fallen to below 2 per cent and may well fall further. The graph on the left shows how it was at its peak in the 2001 general election. On the best case calculated by Longview Economics it recovers a bit, but this assumes that people will carry on extracting equity from their homes by remortgaging and carry on increasing their other borrowings. On more realistic assumptions discretionary income will continue to fall and on the more pessimistic assumptions it will fall to about 1 per cent a year."

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6.8%?

That's remarkably consistent with a recent poll on HPC which indicated 'real' inflation was 7-8%. if wages increased to match this rate the country would have serious inflationary worries once again.

No wonder the Government fiddles the figures on inflation.

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When have governments done anything else?

Never. Just that they are robbing more from us now, than I've ever seen in my working lifetime!

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Lots of ranting about the inflation figures relationship to reality on HPC, here's some interesting analysis to back it up: quote from Hamish Macrae in today's Independent drawing on research from Longview Economics whose website is http://www.longvieweconomics.com/

"Two points here seem to me to be most interesting. One is the distinction between actual spending and discretionary spending. If the price of petrol goes up, you have to pay it. I suppose given time you could switch to a diesel car or buy a smaller one. But in the short run there is nothing much to be done. Ditto taxes. Ditto mortgages. Ditto odds and ends such as parking fines, which, however careful you are, are almost impossible to avoid nowadays. Even leaving such little matters as fines aside, Longview Economics calculates that inflation in these non-discretionary items will increase by 6.8 per cent this year.

So while inflation on paper remains very low, in practice for most people, it is material. If you look at real discretionary disposable income - ie what people have left to spend after paying all the bills they have to pay - this has fallen to below 2 per cent and may well fall further. The graph on the left shows how it was at its peak in the 2001 general election. On the best case calculated by Longview Economics it recovers a bit, but this assumes that people will carry on extracting equity from their homes by remortgaging and carry on increasing their other borrowings. On more realistic assumptions discretionary income will continue to fall and on the more pessimistic assumptions it will fall to about 1 per cent a year."

NIce find JJ - I'll read this one fully later.

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  • 301 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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