Tuesday, January 4, 2011
The real face of inflation 8%?
VAT change will be used to hide 8pc price rise
The cost of many goods and services will rise by more than three times the rate of the VAT increase as businesses use the tax to mask a more dramatic price review, leading industry experts warn today. The rate of Value Added Tax rose by 2.5 percentage points at midnight, from 17.5 per cent to 20 per cent – an attempt by the Coalition to reduce the deficit. But analysts believe many gyms, mobile phone companies, restaurants and shops will raise their prices by between 5 per cent and 8 per cent, or possibly more.
Posted by hpwatcher @ 05:43 AM (1961 views)
13 thoughts on “The real face of inflation 8%?”
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drewster says:
Makes sense. If you’re going to reprint menus and price lists, you’ll do it this month because of the VAT rise. Remains to be seen how much consumers cut back spending in response to higher prices + stagnant wages. Add in the risk of interest rate rises, and I get the feeling consumer spending is going to fall a lot this year.
hpwatcher says:
Yes, I think it is far too tempting not to add a few more pence when a business is revising their prices – especially in the light of the increase in commodity prices i.e. cotton up 90% this year.
Wish I’d paid more attention to the advice of Jim Rogers……..
house says:
Consumers have a choice. They do not have to spend. If the prices have gone up higher, then perhaps we may have less wastage in food and clothing and new gadgets need be bought for the sake of it. People may be more discerning in their spending. Prices have to go up a lot higher before I see any real hardship because since the credit crunch of 2007, I have not seen any real decline in spending. No doubt someone on here will prove me wrong.
wdbeast says:
Spookily accurate in our case.
I am a non-food retailer and our prices went up by a total of 8.3% this this morning.
I know many of the major clothing multiples are increasing their prices by similar amounts.
The issue retailers face is whether customers will buy at these prices or if we will be forced into more and heavier reductions during the year.
30 years of experience tells me it will be the latter.
Crunchy says:
4. wdbeast
Everything is linked to the price of oil. Simples!
If you think current prices are expensive, just wait till we are further into the year.
THE SQUEEZE.
Crunchy says:
3. house said…Consumers have a choice. They do not have to spend.
All very well for those who have that luxury of margin. Many people don’t and are witness to inflationary pressures on all essentials.
So the banks got bailed out and just where did they punt the money. Yes, the crash is coming, always follow the money.
general congreve says:
@3 – Indeed, the upside to rising living costs is that hopefully our women will soon look as svelte as their Ukrainian and Russian counterparts 🙂
Unfortunately our economy depends on them being fat heffers, so it’s the economy or fit birds, take your pick.
drewster says:
gc,
The reason eastern European women are svelte isn’t directly related to the economy, but to opportunities for male employment. In Latvia the problem is particularly acute. Further reading:
BBC News: Latvian man shortage leaves women lost for love
Marginal Revolution: A Theory for Why Latvian Women are Beautiful
Crunchy says:
5. general congreve said – “Unfortunately our economy depends on them being fat heffers, so it’s the economy or fit birds, take your pick.”
….Stop sitting in McDonalds and join a fitness club, that’s if you can make the push ups old boy!
Crunchy says:
drewster,
Don’t forget the spare suitcase.
general congreve says:
@6 – Just meant they’ll be slimmer (which will make some more attractive – but won’t help all of course!). Totally agree with this from the comments section of the second article:
[i]Another theory: The high degree of males killed in WW2 in Eastern Europe (and in the Baltics especially) led to intense selection pressures amongst the women when competing for husbands. Ugly women were somewhat out-competed, leading to a higher average beauty.[/i]
A few years ago a Bulgarian colleague gave me the very same theory for the beauty of Russian women.
bellwether says:
Surely anything that squeezes the pockets of the over indebted is good news for HPC’ers – I mean I’d prefer if the burden was debt specific eg interest rate increases, but I pretty much cheer anything that makes life more difficult for the overextended.
GC Gillian McKeith is skinny.
alan_540 says:
As house says, the sensible will vote with their feet and drop their consumption, which if we all did would ensure prices went up only by the extra 2.5% VAT increase. No doubt though some retailers will increase prices above and beyond the VAT increase so that when they have discounts it will make the sale price percentage drop look more impressive – the big supermarkets are good at this and tend to get away with it due to the many thousands of product lines they stock.