Import Goods Inflation - 8.2%

[FTBagain]

Saw a very brief story at the bottom of one of the business pages in the Mail this Thursday. Important goods are 8.2% higher today than a year ago. Looks like we are now importing inflation rather than deflation. How on earth CPI is at 3%?

Editted: Typo

Edited June 14, 2008 by FTBagain

[OzzMosiz]

Saw a very brief story at the bottom of one of the business pages in the Mail this Thursday. Important goods are 8.2% higher today than a year ago. Looks like we are now importing inflation rather than deflation. How on earth CPI is at 3%?

Editted: Typo

That's called lies and fiddling!

Edited June 14, 2008 by OzzMosiz

[jdc]

Saw a very brief story at the bottom of one of the business pages in the Mail this Thursday. Important goods are 8.2% higher today than a year ago. Looks like we are now importing inflation rather than deflation. How on earth CPI is at 3%?

Editted: Typo

Because about half the price of stuff in the shop is the cost of it, and about half is the cost of renting the shop and paying the staff.

Rents are falling and staff aren't getting pay rises. So halve your 8.2% and you get 4.1%, which is roughly right for RPI.

Then fiddle it a bit extra to get to CPI.

[The 4 Horsemen]

We are a net importer of most consumer goods so it is obvious we will get imported inflation. If this inflation gets translated into higher interest rates, it should have a knock on effect of strengthening exchange rates. Clearly I am talking about an economic text book situation where governments don't panda to VI's.

[FTBagain]

Because about half the price of stuff in the shop is the cost of it, and about half is the cost of renting the shop and paying the staff.

Rents are falling and staff aren't getting pay rises. So halve your 8.2% and you get 4.1%, which is roughly right for RPI.

Then fiddle it a bit extra to get to CPI.

Nearest thing to a reasoned answer yet. Interesting point.

Of course 8.2% is just imported stuff. Local food, for example, is rising fast as well. I think that currently a lot of the price rising are being absorbed by competing stores. Once a few of them go bust those left standing will be able to hike their prices and restore their profit margins. Rather like the banks are doing at the moment with lending rates.

I think inflation is heading upwards for the rest of this year (won't be a straight line).

[refusnik]

Pips will finally wake up when cost of electronic goods and useless gadgets will start to increase at a faster rate than hedonistic adjustment applied to them. Big names have already announced pending increases.

Edited June 14, 2008 by refusnik

[Stanley]

Maybe it's time I started CPI-ing my tax return. I think stripping out certain increases in my invoices could be perfectly justifiable in the current climate. I could just switch to my core income.

[betterToDo]

We are a net importer of most consumer goods so it is obvious we will get imported inflation. If this inflation gets translated into higher interest rates, it should have a knock on effect of strengthening exchange rates. Clearly I am talking about an economic text book situation where governments don't panda to VI's.

Could you explain to me what effect the government has on exchange rates or inflation?

Here was me thinking the government didn't control our money supply?

[OzzMosiz]

Could you explain to me what effect the government has on exchange rates or inflation?

Here was me thinking the government didn't control our money supply?

ONS (Office for National Statistics - a Government department) are responble for what goes in the CPI basket. This is the inflation measure the MPC are targetted with controlling. Therefore the MPC are not independent and are infact controlled indirectly by the government!

Edited June 14, 2008 by OzzMosiz

[The 4 Horsemen]

Could you explain to me what effect the government has on exchange rates or inflation?

Here was me thinking the government didn't control our money supply?

In a high inflationary environment interest rates increase to control inflation also bank raise interest rates due to savers demanding it. Who calculates and informs us of CPI/RPI? The government and government organisation such as the ONS. If CPI/RPI were reported as we all know they are, interest rates would have to rise. Which can result in higher cash inflows to the UK these need to be converted into sterling. Demand for sterling increase which has the effect of strengthening exchange rates. Which can cancel out imported inflation; look up purchase power parity in Wikipedia and the law of one price.

My Point being the false CPI/RPI figures.

EDIT:

Edited June 14, 2008 by The 4 Horsemen

[The 4 Horsemen]

ONS (Office for National Statistics - a Government department) are responble for what goes in the CPI basket. This is the inflation measure the MPC are targetted with controlling. Therefore the MPC are not independent and are infact controlled indirectly by the government!

Exactly right

[thod]

Because goods have the price adjusted. If a top of the range Chinese computer costs $1000 3 years ago and still does today, then they say but its twice as fast, so we will adjust it to £500.

[Minos]

Because goods have the price adjusted. If a top of the range Chinese computer costs $1000 3 years ago and still does today, then they say but its twice as fast, so we will adjust it to £500.

Adjust for the true rate of inflation and they are practically giving them away.

[BearNecessities]

Because about half the price of stuff in the shop is the cost of it, and about half is the cost of renting the shop and paying the staff.

Rents are falling and staff aren't getting pay rises. So halve your 8.2% and you get 4.1%, which is roughly right for RPI.

Then fiddle it a bit extra to get to CPI.

Commercial rents are not falling and even if they were, then retailers would not get the benefit of the lower rents until the end of their lease. Leases on retail premises are usually between 10 and 25 years with upwards only rent reviews at 5 yearly intervals. Some leases for retailers at the very bottom of the market i.e independant one man, one shop bands will be on shorter more flexible terms, however, I doubt much in the inflation basket is purchased from this type of outlet.

[Guest tbatst2000]

Saw a very brief story at the bottom of one of the business pages in the Mail this Thursday. Important goods are 8.2% higher today than a year ago. Looks like we are now importing inflation rather than deflation. How on earth CPI is at 3%?

Editted: Typo

That's a shame, people will have to stop eating plasma screen tellies and go back to spuds instead. At some point all this has to give and feed into both official CPI and RPI.