Tuesday, Jun 13, 2006

No confidence in inflation data

The Independent: Why the real rate of inflation is twice what the official figures tell us

Official figures later this morning are expected to reveal that inflation rose to 2.1 per cent from 2.0 per cent last month. While this will create huge excitement among City traders betting on the next move in interest rates, it will leave millions of ordinary people scratching their heads in bewilderment. Perhaps with good reason.

Posted by Nelson @ 02:25 PM (559 views)
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8 Comments

1. denzil said...

Interesting that the media are starting to pickup on "suspect" inflation stats.

Tuesday, June 13, 2006 05:31PM Report Comment
 

2. Paul said...

A fantastic example of a government in decline - trying to fool all the people all the time to keep interest rate rises and a HPC at bay.

Tuesday, June 13, 2006 06:44PM Report Comment
 

3. tyrellcorporation said...

"Official figures later this morning are expected to reveal that inflation rose to 2.1 per cent from 2.0 per cent last month."

It's that 0.1% increase again!?!

Tuesday, June 13, 2006 07:03PM Report Comment
 

4. Siechip said...

wake up and smell the coffee.... Glubberment!

Tuesday, June 13, 2006 08:01PM Report Comment
 

5. Dadm said...

At last.....the media have picked this up..

and a well written article which explains what I have been saying for months.

My firm has had a record year, yet wage increases will be 3%. What does that tell you? They will tell us all that is is an above inflation increase.

The result....Gordon Brown has won....real inflation is 5-6% (on a conservative estimate)...yet wage price inflation is stopped through false information from the Ministry of Information.....

..we are a nation of idiots.

Wednesday, June 14, 2006 06:04AM Report Comment
 

6. uncle tom said...

Yes, non-discretionary inflation is high, but CPI is low because discretionary inflation has been low - in fact, slightly negative.

This is partly because the data collaters have this naughty habit of adding the latest gizmos when they're new and expensive, and then ditching them when they've stopped falling in price - for example, why was a printer for a personal computer dropped out of the index? - we all still use them.

But mainly it's because Chinese products have improved in quality enormously, while the price has remained static - or fallen.

That (as I pointed out on this blog, long before it hit the headlines) is coming to an end. The price of Chinese products is rising now - and quite rapidly. As an importer, I am anticipating paying 8-12% more next year - partly due to Chinese domestic inflation, but mainly due to less favourable exchange rates.

Whilst I don't believe that the inflation this will cause can be fully controlled by tweaking interest rates, I believe it very likely that central bankers will attempt to do so - until they are forced to concede defeat.

The outlook looks a bit messy - and bleak for those who have over-borrowed.

Wednesday, June 14, 2006 09:45AM Report Comment
 

7. bidin'matime said...

And again the BBC did us the service of reporting the worsening economic situation on their 10 o'clock news - Evan Davies wrote an article back in 2004 saying that house prices needed to fall - I'm sure he's enjoying the reports he's now giving.

Wednesday, June 14, 2006 01:31PM Report Comment
 

8. Chug said...

I just wanted to add my voice to this that I'm sooooo glad the press have finally picked up on this. Each time I go through my budget at home I'm shocked by how much less I have left over than the last time I did it. And it's all going on petrol, council tax, electricity and water bills. The fact that food is cheap doesn't come into it - I now spend the same on food a month as I do on council tax.

Similarly other consumer goods - it might be great that electronic goods from China have been very cheap, but I don't buy them every month, and anyway they are discretionary spend. Try not spending money on your concil tax and utility bills and see how far it gets you.

The pay offer this year to the staff where I work is an "above inflation" 2.5%. If that's above inflation (as my previous pay rises have been in theory) then how come I keep getting worse off in real terms - in terms of the chunk of my pay cheque that's really left over in cold hard cash when I've paid all my bills?

It's all going to get very messy soon because this pattern can only continue for so long before people can't pay their bills and financial commitments any more. That's just inevitable if the real way in which prices are going up outstrips the real way wages are going up. It's a slow process, but even if the MPC and Gordon "lend us a fiver" Brown don't raise interest rates somethings going to give sooner or later. It's just delaying the inevitable...

Wednesday, June 14, 2006 01:41PM Report Comment
 

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