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MSE News: Inflation dives as economy put on 'negative outlook'
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Former_MSE_Helen
Posts: 2,382 Forumite
This is the discussion thread for the following MSE News Story:
"Hard-pressed families felt relief as official figures show the rate of inflation fell to its lowest level in two years ..."
"Hard-pressed families felt relief as official figures show the rate of inflation fell to its lowest level in two years ..."
Read the full story:
Inflation dives as economy put on 'negative outlook'
This thread is not in the 'discuss house prices and economy board' as that is only open to those logged into the forum so anyone coming from the news story may not be able to see it.
Inflation dives as economy put on 'negative outlook'
This thread is not in the 'discuss house prices and economy board' as that is only open to those logged into the forum so anyone coming from the news story may not be able to see it.
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And those who locked themselves into index linked savings plugged over the last few months will be worrying, although they were warned. If interest rates were to rise this wouldn't be too bad but I'm not holding my breath. I only hope the reduction in the price of mortgages doesn't spark of a boom in house prices again, tempting families into more debt on overpriced housing.0
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Found this stunning reasoning and analysis quite amusing ......
"Inflation expectations tend to follow actual inflation and, given that the CPI appears to be heading sharply lower, we expect inflation expectations to do likewise," James Knightley from ING bank.
http://www.bbc.co.uk/news/business-17025863
JamesU0 -
The statistics released today are not "good news". As usual the media focus on the headline stats but digging down into the statistics reveals a more worrying story.
The real story isn't that CPI fell heavily - that was to be expected with the VAT increase falling out of the calculations. No, the real story is that inflation ignoring taxation INCREASED by a huge 0.8 percentage points.
EDIT: Oh, and can MSE staff please decide where to put inflation threads. Sometimes they are in here, sometimes they are in the Savings board, but never are they in the Economy Debate board - which seems to me the most logical place to put them.Did you really mean to put loose?
Lose: no longer possess, not to retain, unable to find
Loose: not firmly or tightly fixed in place0 -
"It's important to understand the rate of inflation dropping does NOT mean prices are dropping, it means prices are RISING less quickly"
Pleased to see you're stressing this point. It really irritates me that all news coverage I see (whenever the rate of inflation falls) seems to be misleading, i.e. some spokesperson putting across the view that this means families will have more money in their pocket. That would only be true if salaries / wages had continued to rise in line with the rate of inflation. Whereas, I think it would be more accurate to say that most households have been affected by a decrease in income since the recession, through pay cuts, job losses, having to take on lower paid work etc.0 -
AirlieBird wrote: »The statistics released today are not "good news". As usual the media focus on the headline stats but digging down into the statistics reveals a more worrying story.
The real story isn't that CPI fell heavily - that was to be expected with the VAT increase falling out of the calculations. No, the real story is that inflation ignoring taxation INCREASED by a huge 0.8 percentage points.
Interesting, where do you get the 0.8 from? Is there an index excluding VAT?0 -
Found this stunning reasoning and analysis quite amusing ......
"Inflation expectations tend to follow actual inflation and, given that the CPI appears to be heading sharply lower, we expect inflation expectations to do likewise," James Knightley from ING bank.
http://www.bbc.co.uk/news/business-17025863
JamesU
That really is interesting. I find it entirely credible. At the same time if you read the Bank of England Inflation Reports, they talk about people's inflation expectations as being a PREDICTOR of actual inflation (if people expect big inflation they demand bigger pay rises etc).
So here we have a virtuous or a vicious circle. A tipping point perhaps. If both are correct we are doomed to either a spiral of deflation, or runaway hyperinflation. You just can't win can you ... unless you've bought certain types of inflation linked savings which guarantee never to fall. :j<From the MSE artice>"It's important to understand the rate of inflation dropping does NOT mean prices are dropping, it means prices are RISING less quickly"Pleased to see you're stressing this point. It really irritates me that all news coverage I see (whenever the rate of inflation falls) seems to be misleading, i.e. some spokesperson putting across the view that this means families will have more money in their pocket. That would only be true if salaries / wages had continued to rise in line with the rate of inflation. Whereas, I think it would be more accurate to say that most households have been affected by a decrease in income since the recession, through pay cuts, job losses, having to take on lower paid work etc.
However. whilst this is normally true - that despite a fall in the headline annual %age change in inflation rate prices have increased year on year and also since the previous month's announcement, on this occasion ABSOLUTE PRICES REALLY HAVE FALLEN. Look at the detailed figures in the link below, and the index level of CPI and RPI have both FALLEN in January, back to where they were in October or November 2011, depending on you preferred measure. This is not just seasonal, they didn't fall back like this in recent years.Interesting, where do you get the 0.8 from? Is there an index excluding VAT?
Yes there is - e.g. table 19 in the data published by ONS. http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2012/cpi-and-rpi-detailed-reference-tables.xls - although I cannot see where AirlieBird gets the suggestion of a 0.8 percentage point increase from at all.0 -
Yes there is - e.g. table 19 in the data published by ONS. http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2012/cpi-and-rpi-detailed-reference-tables.xls - although I cannot see where AirlieBird gets the suggestion of a 0.8 percentage point increase from at all.
Thanks for this, the 0.8 comes from the difference between
3.6 in January 2012 minus 2.8 in December 2011 (table 19b)
The 2.8 in December seems to be a low blip or outlier though.0 -
Hardly. Still would be earning 3.9% (plus a variable bonus) tax-free, whereas the highest paying savings account is only paying 3.2%, before tax. Plus inflation is likely to surge again as the BoE dumps more cash into the system.And those who locked themselves into index linked savings plugged over the last few months will be worrying.
We've been here before, the MPC predicting deflation which never quite happened. Even if it does, the value of your investment is protected. Nothing to worry about here, I'm quids in.poppy100 -
Think I'll wait till the effect of all this Quantitative Easing works its way through the system over the next few years before I start worrying. I tend to be more worried about banks collapsing along with the Eurozone than I am about low inflation.And those who locked themselves into index linked savings plugged over the last few months will be worrying . . .
Warning: In the kingdom of the blind, the one-eyed man is king.
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