Tuesday, August 10, 2010

The true inflation rate is closer to 10 per cent than five, and may even be higher says Martin Vande

The real cost of inflation

Id guess the true middle-class inflation rate is closer to 10 per cent than five, and may even be higher. If you dont believe me, start with the basics and scrutinise your grocery bills. I nearly fainted in the deli when I was told that the £13.40 sticker on a kilo bag of Yorkshire Dales Granola was not an error. Nearby, a small jar of local honey cost a startling £6 possibly due to a global bee crisis, but also because thats the way prices are heading for all food items that are a cut above the two-for-one value-pack supermarket ranges. Even staple items are vulnerable to sudden hikes: a surge in wholesale wheat prices, no doubt encouraged by hedge-fund speculators, is about to add 10 pence to your basic loaf of bread.

Posted by mark @ 11:25 AM (3463 views)
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25 thoughts on “The true inflation rate is closer to 10 per cent than five, and may even be higher says Martin Vande

  • general congreve says:

    Was speaking to a relative the other day, she says her weekly shopping bill has increased by about 13% in the last year for the same basket of goods. She says that includes a broad range of grocery items, so not just food, but toothpaste etc.

    Personally I don’t keep such an accurate eye on things, but have noticed my bill in the supermarket seeming bigger than it was last year. Two things I have noticed though are alcohol, used to be able to get 10 bottles of supermarket own brand lager for 4.99 a year ago, now 5.99 (I know most of this is additional taxation, but still, what a [email protected]) and supermarket own brand soups, were 44p per tin, hiked about a year ago to 52p per can – that’s your 13% right there!

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  • is that 10 bottles a week or a night..lol

    I have noticed a lot of prices have shot up too, however shopping at our local thai shop has reduced our bill somewhat, anywhere like chinatown or the indian shops in manchester offer some really good prices for fruit and veg or tinned foods

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  • This is really worrying – everything seems to be going up in price….apart from housing, which is heavily inflated anyway. Perhaps the cost of everything will rise to the same level as housing? Scary thought.

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  • The stuff I’m buying down the supermarket seems to be going up massively. Essentials that were £6 two years were up to £8 last week, now £9 this week. These are not one-off’s either, I’m seeing it on a vast range of items.

    Inflation is feeling more like 10% to me too.

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  • Petrol seems to be going down in my area though (!?) has anyone else observed this?

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  • To me there is no doubt the CPI and RPI figures are wrong. Or at the best they are not a true reflection of the inflation of the cost of living, i.e. the things i buy week to week.

    How long can the government keep up this farce, and when will pressure mount on the BoE to increase rates? I believe that they will resist this for as long as possible, believing their own BS that the budget can be tamed. But due the the election cycle, and the power hungry self serving interests of the politicians, they will fail and the credit crunch in the banking world will re-emerge in the sovereign markets.

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  • Seeing this as well. What you need now is a farm!!

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  • @nod2glod

    “To me there is no doubt the CPI and RPI figures are wrong. Or at the best they are not a true reflection of the inflation of the cost of living, i.e. the things i buy week to week.”

    I think they’re held down by declining quality at the bottom end: supermarkets (and their suppliers) source cheaper and cheaper ingredients for ready meals; own-brand goods; etc., which then only go up in price slowly or not at all. At a fixed quality level, the increase in prices is much more acute.

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  • Just been watching ITV lunch news, scary, very scary, sentiment has changed overnight.. houseprices down, economy down, james caan begging for more QE wonder why?

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  • Won’t be long before people start co-ordinating their shopping… If 2 families shopped together and bought all the BOGOF’s, they could share them and save a fortune!

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  • Just been watching ITV lunch news, scary, very scary, sentiment has changed overnight.. houseprices down, economy down, james caan begging for more QE wonder why?

    I guess so inflation can be used as a device to give the impression that prices across the economy are being maintained. Funny old world.

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  • Again..Hyperinflation, food shortages.

    Some things are more obvious to some than they are to others.

    BTW nice call on the Euro/Usd JD. It has also put in a bearish head and shoulder pattern..

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  • I get so fed up of this constant bleating about above inflation food prices on this board. Granola? Honey?

    Jesus, it’s the UK in the 21st Century we’re talking about. You’re supposed to be eating Blu-Ray Players and George @ Asda School Uniforms you muppets!!!

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  • I get so fed up of this constant bleating about above inflation food prices on this board. Granola? Honey?

    You obviously aren’t trying to buy a house. Bank of mum and dad?

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  • You obviously aren’t trying to buy a house. Bank of mum and dad?

    meoww

    People need food – it’s called high inelasticity. The increase in the price of essentials will hardly cause any pandemic of inflation. People will just not buy anything they don’t need. Like houses, cars, holidays, new blue-rays, Primarni, flat-screens, rose wine, branded food. To use another term, it’s price reference point awareness. 4 years ago who the hell cared about the price of food. Now they do, and see it, and write about it.

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  • growler

    I have to question
    “People will just not buy anything they don’t need. Like houses, ”

    everyone needs a roof over their heads.. Is a tent perhaps a better choice or maybe scrounging from the government?

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  • Hi Mark

    perhaps I should have written “the urge to be active in the housing market will principally be driven by necessity, not willingness or ability”

    Since to an economist demand is “desire, backed by willingness and ability” then if they can’t, or don’t want to – they’ll only be active if they have to.

    Which is why i would soon expect some contrast in the market between products that are distress purchase items, and those that are considered and those that are essentials.

    I don’t think there is there any analysis on this…. you have to search for it longhand.

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  • The increase in the price of essentials will hardly cause any pandemic of inflation.

    Would you regard milk as an essential? The cost of milk has been kept artificially low for many years – would you object to paying 5.00 for your daily 2 litres?

    You seem to be saving that you wont?

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  • I get sticker-shock when I go in supermarkets, which I don’t do much any more. Last year, I signed up for a local organic box scheme. No increase in price, and no decrease in quality or quantity of produce.

    Got an allotment, get free exercise, and the value of the produce I grow must be going up every month. Nice, although I was lucky to get one after two years on the waiting list.

    I go in my local Co-op and there’s loads of marked-down produce, like 40p for a cauliflower, etc., £1 for a kilo of dried pasta. I spend less than £10 and can barely carry the bag out of the shop.

    The answer is to adapt rather than being suckered into buying all that heavily marked-up processed food in shrinking packages. I know that’s hard for some people, but there are lots of changes ahead, and people who adapt will thrive. People who don’t, won’t.

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  • 13. mark said…
    everyone needs a roof over their heads.. Is a tent perhaps a better choice or maybe scrounging from the government?

    Mmmm…scrounging from the government? – maybe some of the ‘scroungers’ are lardarses and ‘too big to fail’

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  • HPC: My point it one about economics, not personal choice.

    I think it is safe to say that most people would happily pay less for what they buy. There are people with more tolerance to pay more – and this is a factor of perceived or actual need. For some, it’s milk they want, for others, it’s a bottle of scotch.

    Some people will also not buy a product because it is too cheap. Others have to buy because they have dependency issues impairing rational consumer behaviour – like drugs, or controvertially, the feel good factor: The people that ignore the credit card statements and keep on buying.

    It’s called price elasticity. I will pay more if I “have” to have it – ultimately regardless of if I like the price or not. If goods with high inelasticity go up in price – the price gets paid and other items on the list that I don’t need don’t get bought. This is NOT inflation.

    So, I put to you this theory:

    (1) Comments that a lack of interest in inflation means people have advantageous private sources of cash to render the concern about inflation irrelevant
    (2) A discussion about the nature of pricing means people don’t mind paying more

    Is this a reflection of reality, or a statement of prejudice?

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  • HPC: My point it one about economics, not personal choice.

    I think it is safe to say that most people would happily pay less for what they buy. There are people with more tolerance to pay more – and this is a factor of perceived or actual need. For some, it’s milk they want, for others, it’s a bottle of scotch.

    Some people will also not buy a product because it is too cheap. Others have to buy because they have dependency issues impairing rational consumer behaviour – like drugs, or controvertially, the feel good factor: The people that ignore the credit card statements and keep on buying.

    It’s called price elasticity. I will pay more if I “have” to have it – ultimately regardless of if I like the price or not. If goods with high inelasticity go up in price – the price gets paid and other items on the list that I don’t need don’t get bought. This is NOT inflation.

    So, I put to you this theory:

    (1) Comments that a lack of interest in inflation means people have advantageous private sources of cash to render the concern about inflation irrelevant
    (2) People discussing the theory of pricing means they don’t mind paying more

    Is this a reflection of reality, or a statement of prejudice?

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  • 16.

    or lordarses too big to succeed.

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  • Sorry if my humour was too subtle there. That whole comment was written firmly tongue in cheek.

    For the record I STR’d in late 2006 because I thought the market was getting overheated and the bank of mum and dad is firmly closed! Like many here I didn’t anticipate Labour’s willingness to mortgage the entire country and I didn’t anticipate the country’s desire to lap it up.

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  • (1) Comments that a lack of interest in inflation means people have advantageous private sources of cash to render the concern about inflation irrelevant
    (2) People discussing the theory of pricing means they don’t mind paying more

    You are regarding these things in isolation, which is fine, but they need to be regarded within the context of the general economy. Fifty pence added to the price of a pint of milk may be okay, if you are able to cut back on adding to your DVD collection, or are even happy to switch from Heinz baked beans to a supermarkets own brand label….but if you have a big mortgage and are worried about losing your job, then fifty pence can be a big deal.
    Each one of these small things can add up to a big thing. I have a close friend and he is absolutely going off his head at the amount at which prices are rising – he has a family, with 2 children – and he has begun to ration his weekly spend to a certain amount, which he carries in cash – he won’t carry cards as he finds it too easy to over spend and go over the weekly spending limit.

    Talking about these concepts is fine in the abstract, but in the real world they seldom come alone and must be considered within the context of the general economy and environment.

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