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Inflation Is Officially At Highest Level Since 1990's

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http://business.guardian.co.uk/story/0,,1858785,00.html

Worst inflation since early 1990s prompts rate rise fears

Larry Elliott, economics editor

Saturday August 26, 2006

The Guardian

The prospect of further interest rate rises loomed larger yesterday after the government revealed that consumer-driven growth was prompting a sharp pick-up in the cost of living.
Official figures showed the heftiest rise for 15 years in the GDP deflator - a measure of underlying inflation - heightening fears at the Bank of England that price pressures are building up in the economy.
City analysts said the combination of stronger growth and higher inflation made it more likely that the Bank's monetary policy committee would raise rates by a quarter point to 5.25% later this year, with November the likeliest date.
Publishing its breakdown of growth in the second quarter of 2006, the Office for National Statistics said the economy expanded by 0.8% in the three months to June and had grown by 2.6% since the spring of 2005. New figures showed consumer spending rallied from its dip earlier this year to a 1% quarterly rise.
Inflation, as measured by the GDP deflator, rose from 2.4% to 3.4% between the first and second quarters, and was at its highest level for three years. The 1.5% jump in the second quarter alone was the strongest since the early 1990s....../
He said: "The outlook thereafter is less positive, with rising borrowing costs, utility bills and unemployment set to lead to weaker consumer activity, while the growing threat of a significant US slowdown and sterling strength will also weigh on activity."

The future for Gordon's booming HPI-MEW looks bleak, very bleak. :( *

______________________

* :):D:lol::lol::lol:

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http://business.guardian.co.uk/story/0,,1858785,00.html

Worst inflation since early 1990s prompts rate rise fears

Larry Elliott, economics editor

Saturday August 26, 2006

The Guardian

City analysts said the combination of stronger growth and higher inflation made it more likely that the Bank's monetary policy committee would
raise rates by a quarter point to 5.25%
later this year, with November the likeliest date.

Just look at that Freudian. Clearly Larry is resigned to (and has mentally factored in) a second, previous rise to 5%, and that before November!

Oh the signs of the times they are a-changin'....

Edited by Qetesuesi

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The UK will be lucky to escape 6.5% by the end of 2007...

Payback, as they say, is a bitch.

Question is: if HPI had been properly included in the RPI/CPI all along as it should have been, what would IRs have been all these years???

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Question is: if HPI had been properly included in the RPI/CPI all along as it should have been, what would IRs have been all these years???

Real inflation would have been lower. Without a debt funded spendfest there would never have been the same level of demand pressure on commodities, energy, land prices, rents rates - everything really and there wouldn't have been all the debt sloshing round the economy to inflate prices.

We may have kept a few more of the jobs that are now going abroad, although all the excess jobs in retailing and services spiked by the debt punch that are now going to be lost wouldn't have existed in the first place.

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http://business.guardian.co.uk/story/0,,1858785,00.html

Worst inflation since early 1990s prompts rate rise fears

Larry Elliott, economics editor

Saturday August 26, 2006

The Guardian

The prospect of further interest rate rises loomed larger yesterday after the government revealed that consumer-driven growth was prompting a sharp pick-up in the cost of living.
Official figures showed the heftiest rise for 15 years in the GDP deflator - a measure of underlying inflation - heightening fears at the Bank of England that price pressures are building up in the economy.
City analysts said the combination of stronger growth and higher inflation made it more likely that the Bank's monetary policy committee would raise rates by a quarter point to 5.25% later this year, with November the likeliest date.
Publishing its breakdown of growth in the second quarter of 2006, the Office for National Statistics said the economy expanded by 0.8% in the three months to June and had grown by 2.6% since the spring of 2005. New figures showed consumer spending rallied from its dip earlier this year to a 1% quarterly rise.
Inflation, as measured by the GDP deflator, rose from 2.4% to 3.4% between the first and second quarters, and was at its highest level for three years. The 1.5% jump in the second quarter alone was the strongest since the early 1990s....../
He said: "The outlook thereafter is less positive, with rising borrowing costs, utility bills and unemployment set to lead to weaker consumer activity, while the growing threat of a significant US slowdown and sterling strength will also weigh on activity."

The future for Gordon's booming HPI-MEW looks bleak, very bleak. :( *

______________________

* :):D:lol::lol::lol:

From Wikipedia, the free encyclopedia

In economics, the GDP deflator (implicit price deflator for GDP) is a measure of the change in prices of all new, domestically produced, final goods and services in an economy. GDP stands for gross domestic product, the total value of all goods and services produced within that economy during a specified period.

The GDP deflator is not based on a fixed market basket of goods and services. The basket is allowed to change with people's consumption and investment patterns. Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices.

A few years ago I was convinced that Gordon Brown had gambled one stealth-tax too far: pensions' dividend tax, oil raid and mobile telephone licenses; just to name a few! The reality is that the general public don't care; it's just us pessimists (realists if you will) that notice what's going on. I am convinced that somehow, in the true spirit of NU Labour, he will avoid any criticism.

I'd like to know what damage has been done to the underlying economy. If you remove MEW from the economy can we measure the effect? For example, I know people using MEW (flexible mortgages) to pay their tax bills. This sort of abuse has a lagging effect.

Edited by Xurbia

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Funny this story is generally being ignored by the media. It is probably because most of them are clueless as to what a deflector is. Basic underlying inflation calculated independently of Gordon's magic basket of goods of ever decreasing prices!

1.5% in a single Q is horrendous and probably reflects the 6% or thereabouts that reflects reality on the inflation front. 3 X Gordon's target rate of .50% per Q. :)

Inflation, as measured by the GDP
deflator, rose from 2.4% to 3.4%
between the first and second quarters, and was at its highest level for three years. The
1.5% jump in the second quarter alone was the strongest since the early 1990s.
Michael Saunders, an economist with Citigroup, said the ONS data "altered the balance of the interest-rate debate". Unless there was clear evidence of the economy weakening, or of tougher financial conditions, the MPC was likely to "hike again in November".
Edited by Realistbear

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Another shattering indictment on the Miracle Economy--and inflation:

http://www.telegraph.co.uk/money/main.jhtm...27/ccliam27.xml

The real economy is pushing rates up
By Liam Halligan
(Filed: 27/08/2006)
Economics columnists are not known for their modesty. Opining publicly on financial issues takes a certain amount of chutzpah. So - having tried to justify myself - let me start this week by blowing my own trumpet....../
Now that inflation is above target, and likely to remain there according to the MPC, it did the right thing and raised rates. And I do not think that is the end of it.
Look at food prices. Official figures published last week showed annual food price inflation at 3.2 per cent in July - a three-year high. The cost of groceries has now risen sharply in five of the past seven months.
More importantly, it appears that the era of "cheap" food is over. Between 2000 and 2005, Tesco says UK food prices fell by no less than 15 per cent - contributing mightily to low inflation overall. But since May, the cost of staples such as bread and milk has risen by more than 10 per cent up....../
Tt is true that the Consumer Price Index - the inflation measure the MPC targets - fell slightly last month. The 2.4 per cent July figure was slightly down on 2.5 per cent in June. The low-interest rate cheerleaders say this means no more rate rises are needed.
Let's be honest. The CPI - an index imposed on the MPC by the Treasury - is a ridiculous measure of inflation.
Unravel its components and you discover that it excludes council tax and other housing costs - up sharply under New Labour.
Look closely and you see the weighting the CPI gives gas bills has risen by only 17 per cent since 2003 - while household gas bills are 64 per cent up...../
And that is the main reason why inflation will not abate and rates will rise further
- because, deep down, that is what we all think will happen, even if we are so often told that it will not.

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It is probably because most of them are clueless as to what a deflector is.

Hehe, what a sentence to pick to get it wrong in yourself :lol:

So in case any VI's are wondering what a deflector is, it's a Full Spectrum EM/Quantum Navigational Deflector Dish Array as used on board the USS Enterprise to ward off Klingon attacks.

Whatever you do if it rises to 2.5% you must modulate the frequency and remember it cannae take much more.

Perhaps Captain Gordon is planning to use it shield himself from any criticism.

Edited by HousePriceLottery

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Just look at that Freudian. Clearly Larry is resigned to (and has mentally factored in) a second, previous rise to 5%, and that before November!

He also says; "even before the MPC pushed up interest rates to 5% in early August."

I think he hasn't been paying attention... either that or I missed a rate rise!

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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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