Monday, June 9, 2008

More of that inflation

Factory gate prices surge to 26-year high

The Bank of England is facing further pressure to control rising inflation after it emerged that core factory gate prices surged to 5.7 per cent during May - the highest increase since 1982 and far above the expected 4.7 per cent.

Posted by holding out @ 11:16 AM (1387 views)
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29 thoughts on “More of that inflation

  • Good

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  • My posts keep getting moved around, has the webmaster decided the answers need to be put into alphabetical order. I did not mean ‘good’ to higher prices, I meant ‘good’ to a more sensible view on interest rates.

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  • This is massive when you work out what it will do to inflation, both CPI and RPI.

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  • bystander,

    I’m getting a little puzzled by the tendency of my posts to be inserted mid list – very strange!

    There are 5 comments visible as I post this – see where it appears..

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  • OK, so will this one now go under my last post?

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  • holding out says:

    I’m trying to work out which factory gates they’re talking about.
    The few number of factory gates not torn up and used for gated estates must be swamped by statistics gatherers.

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  • Economists are now talking about the next interest rate adjustment being an increase. The FTSE looked set for a surge today following the success of the RBS rights issue, but this has taken it back down to where it started.

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  • Obviously not aplphabetical UT, but it will be interesting to see if this post appears after or before [email protected]

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  • ..and I can actually spell ‘alphabetical’.

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  • “I’ve been waiting for a while for the Treasury to find a way to circumvent the MPC’s interest-rate setting criteria (such as only using “core” inflation, or resetting the CPI target to 3.5%).”

    …………….the problem with changing CPI to 3.5% or using ‘core’ inflation like the Fed do, and the Ernst and Young item club have suggested the MPC do, to suit GB’s political future aspirations is that any move like that will be seen by international markets and currency strategists as the signal to dump sterling like the bag of rotten junk it would soon become, putting monstrous imported inflation upon an already battered electorate (notice I do not refer to the British public as people, GB doesn’t consider us people we are merely votes), and therefore limiting the chance even more of re-election in 2010. We can only hope GB organises a nice exchange rate for sterling to join the euro or GB realises what a catastrophic chain of events such moves would make. Personally I hope sterling survives these next few years, but I am not holding my breath.

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  • I’ve been waiting for a while for the Treasury to find a way to circumvent the MPC’s interest-rate setting criteria (such as only using “core” inflation, or resetting the CPI target to 3.5%)[email protected] @12

    ….this re-organisation of posts is getting on my nerves.

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  • debtfree…I’ll give you one good reason why the government will want to save the housing market – Northern Rock, at least until it has offloaded all its mortgages and settles for savers.

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  • pelethar,

    Although there will be plenty of Labour donors and MP’s who will be baying in the wings about saving the property market, there is pretty much nothing the government can do.

    The sheer capital value of all Britain’s houses – around £5,000bn at the peak of the market – makes it impossible for the govenment to do much more than breathe soothing noises.

    Labour’s No.1 priority right now is its very own survival – the auditors have to sign off it’s accounts and verify that it is a viable concern by the end of the month; at the last report their were doubts they could make such a claim..

    Now see where this post lands – should be #19

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  • OK, my computer clock said 13.34, but the time stamp on my last post said 12.34

    Have just advanced my clock by one hour – now showing 14.37

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  • OK, that didn’t work. What is happening is that my posts are getting time stamped one hour behind real time – now 13.39

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  • @Pelethar,

    If some catastrophe happens, banks tend to lower rates. I have been agitating on this site for some time about the fact that low interest rates will damage the value of Sterling.

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  • Yes, agree. The govt have been applying pressure to the B of E for at least six months to aggressively cut rates a la Bernanke. To their eternal credit, the MPC have so far resisted, but it will be very interesting to see where they go next.

    I’ve been waiting for a while for the Treasury to find a way to circumvent the MPC’s interest-rate setting criteria (such as only using “core” inflation, or resetting the CPI target to 3.5%).

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  • Bystander – agree with your analysis but you have to put it into a political context. We have a govt and PM heading for a massacre in the next general election. It would not surprise me to see them reach the conclusion that they have to sacrifice everything to try and save the housing market. I can see long term economic stability and the health of sterling becoming a whole lot less important to them.

    The question is, how would the housing market respond? It didn’t work in the US but you also have to factor in the deep belief the punters in this country have that housing is a safe bet in the long run.

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  • What the flip is going on with these posts?

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  • pelethar,

    what makes you think the government would want to save the housing market…?

    you have to ask yourself, why would they. anyone with half a brain knew the market was going to collapse. if they wanted to help, then why didn’t the govermnent prevent this from happening and spiralling out of control ?

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  • Debtfree

    The answer to both questions is the amount of money the government was making on stamp duty in the housing boom. And also the amount of liquidity spread around the entire economy, whose source was people using their homes as a cashpoint (“equity release”).

    The government will be crippled by a crash – it will slash their tax revenues and decimate their popular support. I see it very quickly becoming their number 1 priority, if it hasn’t already.

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  • flintster1994 says:

    Pelethar,

    I believe that any government sponsored bailout of the housing market is nigh impossible given the figures presented by Uncle Tom. Will this stop them from trying, given your arguments? Possibly not. They may try to come up with some sort of new fangled idea. I still think this would be doomed to fail, but their reasoning may be to try anything to help them limp over the line in a couple ofyears time.

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  • flintster1994 says:

    Uncle Tom,

    Be grateful that the clock on your computer normally works. Out here in Shetland, our computer clocks are unable to keep the proper time. Usually 15, 20 minutes behind!

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  • Agree that the government does not have power alone to control the housing market or to avert a crash. The question for me is how will the market respond if/when they do weigh in, bearing in mind the enormous underlying belief in this country (wrong or not) that the housing market is a safe bet in the long run. Also factor in the power of the media – just imagine what the Express are going to do when the nationwide/halifax surveys eventually come up with a monthly gain.

    Personally I don’t think this is going to be enough to counter the fundamental shift in banks’ attitude towards providing credit, but it does make me wonder where the bottom will come. I want to believe in 40%+ falls but it somehow doesn’t feel feasible to me.

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  • Aahh, the computer time glich conspiracy.
    The governments and bankers of the world are colluding to disrupt bloggers by inserting random time bugs into selected computers!!
    This was posted tomorrow at 25:00.

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  • doom&gloom says:

    The japanese govt tried all manner of schemes to try and reinflate the economy out of a slump – increasing public sector employment, huge public works schemes, etc. But their deflating housing market was just an unstoppable reaction to what had gone before. I don’t think there is anything in the world that the government can do now to prevent house price falls which will become a worldwide phenomenon.

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  • flintster1994 says:

    renting2

    Now that was funny!

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  • Flintster1994 says:

    How come every computer that I buy in Shetland seems to be chipped? Barstewards!

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  • flintster1994 says:

    How come every computer that I buy in Shetland has been chipped? Barstewards!

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