Jump to content
House Price Crash Forum
Sign in to follow this  
munimula

Inflation Is Back!

Recommended Posts

The BoE simply aren't going to be able to resist any longer.

Good news for those of us waiting for higher IRs to kill off this housing bubble.

First we had soaring oil prices. Then gas and electricity prices went haywire. More recently, Bank of England governor Mervyn King has voiced concerns that the supply of cheap goods from China is being endangered by soaring wage inflation in the rapidly-industrialising country.

But now the Bank has yet another inflation worry - the price of food.

The heat wave experienced across the world this summer has battered harvests, driving up the price of sugar, wheat, fruit, and orange juice, while freak rain storms in Vietnam have been blamed for coffee prices hitting a seven-year high.

And the bad news for both consumers and Mr King is that the supermarkets aren‘t prepared to take the cost increases on the chin anymore…

With prices soaring in all areas of their business - from wage costs, to fuel costs, to lighting, heating and rates for their stores - it’s no surprise that supermarkets are trying to pass on rising food costs to their customers.

According to the British Retail Consortium, the price of food has risen in five of the past seven months, even while the price of non-food items has kept falling. Even the price of beef is now at levels not seen since before the BSE crisis in 1996, rising 3.1% in the past year.

According to trade magazine The Grocer, Tesco has hiked the price of lettuce by 10.9%, smoked bacon by 13% and milk by 11% in just the past three months. The FT said: “Analysts believe that the latest round of price rises could signal the end of a period of aggressive competition among supermarkets as retailers act to restore profit margins and respond to rising costs.”

Soaring raw materials costs aren’t just down to freak weather conditions. Once again, a great deal is due to high oil prices. And the bad news is that this is only set to get worse. Many oil substitutes, such as ethanol, rely on food components in their manufacture.

The FT also reports that power generator RWE npower is considering converting its oil-fired power station in Kent to run on palm oil. The trouble is, palm oil is also found in one in ten supermarket products. So if the price of palm oil rises as a result of increased demand for power generation, it would also drive up costs for food and cosmetics manufacturers.

Consumer products giant Unilever is apparently so concerned about rising demand for rapeseed oil from biofuel manufacturers that it is lobbying the European Union to allow the use of straw and household waste in making biofuels. The FT reports: “Non-food use of rapeseed oil became more important than food use for the first time last year as demand rose for its use in biodiesel production.”

It seems that there’s no painless way to deal with high oil prices. You can read more about how to invest in alternative sources of oil in the latest issue of MoneyWeek, out tomorrow.

Just before we turn to stock markets - we’re sorry to return to the UK property market, our favourite obsession, but this little gem just had to be acknowledged. Kent Reliance Building Society has now released the ultimate mortgage for today’s debt-laden generation - the mortgage that you never have to pay back.

Purchasers can pay interest-only until the day they die, and then pass the debt onto their children - or perhaps a lucky friend. The beneficiary of this generous inheritance can then live in the house (continuing to pay the mortgage, of course), or pay off the debt if they don‘t want to keep it on. We’re not sure what happens if you have fallen into negative equity by the time of your death - though it might be a good way to get revenge on particularly ungrateful offspring.

This is incredible. People buy property because they believe renting is dead money. But this mortgage gives you the worst of both worlds - you sign a lifetime lease to rent from the bank which ties your offspring to the house as well, but still have to pay all the maintenance bills for the house yourself. Any landlord in the country would rightly cut off an arm to be able to get away with offering the same deal.

This kind of ludicrous offer has got to be proof, for the masses of people who still seem to need it, that the housing market in this country is in a bubble of unprecedented proportions - similar products were all the rage in Japan just before the bubble popped in the late Eighties.

In any case, we doubt many people will be taking it up - with inflation keeping pressure on interest rates to rise, we don’t imagine it will be much longer before the market finally collapses under its own weight.

Share this post


Link to post
Share on other sites

its from Money Week's daily email

They really are very good that lot

Correctly predicted last months IR rise and were talking about rises in general way before the majority of the financial press.

And in case anyone didn't know they are so bearish on the UK property market its unbelievable.

Share this post


Link to post
Share on other sites

Food isn't included in the "core" inflation rate in America - I guess because they don't have to eat?

Or is it because seasonal volatility makes it mask all the other sources of inflation.

I expect the MPC will ignore this one, except as far as the restoration of the profit margin for the retailer represents a secondary effect of high oil prices. Hmmmm.

Share this post


Link to post
Share on other sites

Its clear that after 9 months of "trimming the fat" by accomodating massive input inflation from commodities and energy, businesses need to either restore their profit margins through price rises, [resulting in inflaltion and IR hikes] or shut-down/lay off staff [unemployment].

Neither option is good for Brown's Miracle Economy, and the pain is just starting

Share this post


Link to post
Share on other sites

its from Money Week's daily email

They really are very good that lot

Correctly predicted last months IR rise and were talking about rises in general way before the majority of the financial press.

And in case anyone didn't know they are so bearish on the UK property market its unbelievable.

yep, it's the MoneyMorning mail from MoneyWeek - daily round up of financial news.

I've been a MoneyWeek subscriber for over 3 years now and there is very little that they have got wrong.

The only thing that they haven't been proved right on yet is a HPC - but as they keep saying 'just because it hasn't happened yet.....'

Share this post


Link to post
Share on other sites

The "Food infaltion is 10%" articles only include a few products with high inflation, it's actually 3.2%. I don't think that it will go high as we are in a free trade area and other places within that area are deflating rapidly.

Food inflation in various countries:

UK: 3.2%

Hungry -4.8% (negative number)

Bulgaria -8.4% (negative number)

New Zealand 1.5-2%

Canada 2%

Ireland: 1.7%

Zimbabwe 1069.9%

Share this post


Link to post
Share on other sites

The "Food infaltion is 10%" articles only include a few products with high inflation, it's actually 3.2%. I don't think that it will go high as we are in a free trade area and other places within that area are deflating rapidly.

Food inflation in various countries:

UK: 3.2%

Hungry -4.8% (negative number)

Bulgaria -8.4% (negative number)

New Zealand 1.5-2%

Canada 2%

Ireland: 1.7%

Zimbabwe 1069.9%

Glad to see the Hungry people are getting cheaper food.

Share this post


Link to post
Share on other sites

Hmm,

So, real inflation is outstripping HPI - phew, houses will look cheap soon

Er, but hold on, our wages are only going up by 3-4% thanks to mass immigration

Hmm, borrowing to plug the widening gap (or living in poverty) must be the answer...

I think GB would prefer the 'poverty' option - after all that's what immigration policy has been all about - supressing wages to force down borrowing/spending

/rant over/

Share this post


Link to post
Share on other sites

I can't afford housing

(I could get the same mortgage as any bulls reading that comment, aquiring debt is not connected to what you can afford at all)

But I can afford more expensive food, for I am a succesfull professional (honest ahem)

Bring on the higher IR's..

6%, the long term average..

That would be fine wouldn't it...?? would anyone have been stupid enough to borrow so much that they couldn't afford long term average IR's?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.