UK inflation tipped for big fall

Sir_Humphrey

Generali wrote: »

Amazing. That'll cause a lot of problems to holders of contracts referring to the RPI. Does the Labour Government have the political balls to cut welfare payments in line with deflation?

It depend which bit of Labour wins out. The first thing Labour did in 1997 was cut single parent benefits. I bet James Purnell would cut them. I suspect you may be confusing New Labour for some sort of left-wing party. Whether aggravating a recession by cutting benefits (deflating the economy further) would be a good economic idea is a different issue (it would be political suicide for sure). I suspect we would differ on that, and I would rather leave it at that than go through a predictable argument. One thing that I have been reflecting on is my student loan (with the Student Loan Company). The interest on these is either RPI (for the previous March IIRC), or base rate plus 1%, whichever is lower. I do not know if they have zero-bound in the policy, and therefore whether the govt may be helping me pay off my student loan next financial year!

carolt

poppy10 wrote: »

Clothing and footwear saves the day!
Oh, but wait. We import most of our clothing and footwear, so if Sterling has fallen through the floor, prices should be heading up.... o halp!

And more to the point, the true essentials ie food are still clearly going up.

If times are hard, the fact that the price of carpets or cinema tickets or whatever are cheaper is not going to matter to most people in the slightest.

What they will feel is that their essential spends have gone up hugely, just as their jobs are at risk and wages going up only in line with official inflation figures (ie hardly) if at all.

Plus lots of our food is imported too = even higher prices to come. :eek:

Really2

carolt wrote: »

And more to the point, the true essentials ie food are still clearly going up.

If times are hard, the fact that the price of carpets or cinema tickets or whatever are cheaper is not going to matter to most people in the slightest.

What they will feel is that their essential spends have gone up hugely, just as their jobs are at risk and wages going up only in line with official inflation figures (ie hardly) if at all.

Plus lots of our food is imported too = even higher prices to come. :eek:

Not true on food the graph is 12 months so could have peaked at 15 and come down to 10% yoy. (our shopping is cheaper in the last three months ) a 3 month one would give a fair idea.

We import a lot of our food!
What food we can not basicly grow. If it is more econmocal to buy british we buy british so the exchange rates should be good news for british farmers.

MrDT

Sir_Humphrey wrote: »

One thing that I have been reflecting on is my student loan (with the Student Loan Company). The interest on these is either RPI (for the previous March IIRC), or base rate plus 1%, whichever is lower. I do not know if they have zero-bound in the policy, and therefore whether the govt may be helping me pay off my student loan next financial year!

Something I've been wondering about myself. It'd be great for as long as it lasted, but I fear that high inflation in the future would wipe out the "gains" soon enough

WTF?_2

Sir_Humphrey wrote: »

Well some things may get a bit more pricey, some less so. If the sum of all that is that the stuff going down outweighs the stuff going up, then you get deflation. The stuff that could go up are imports, which as has been argued ad nauseum on these sites are not the important things in life. This is a benefit of the lower pound. You cannot have deflation and stagflation at the same time, they are mutually exclusive. All in all, savers benefit from this, without the need for any savings tax cut gimmicks.

We're going to see less cash in the hands of consumers with the economy in dire straits - but higher prices on the essentials and God knows how much money being printed up and given to the banks (plus probably spent on any number of loony pet projects by our chums in no 10).

That's stagflation in my book. It's perfectly possible for the general public to get poorer and poorer whilst consumer prices rise and new money is pumped into the system without actually getting to the plebs.

Lets look at the facts.

Commodities, equities, shipping - all have dropped like a stone over the last year.

Oil has went from super pricy to super cheap. Petrol/diesel probably as cheap as they are likely to get.

The high street retailers enter into a frenzy of price cutting to liquidate stocks of goods for ready cash as retail businesses go to the wall.

A VAT cut puts more downward pressure on prices.


Yet against all of this, consumer prices this December gone managed to be 3.1% higher than the Dec 12 months before, smashing the government's own target of 2%. That's "Merv writes a letter to the chancellor explaining why inflation is out of control" territory.

Really2

!!!!!!? wrote: »

Yet against all of this, consumer prices this December gone managed to be 3.1% higher than the Dec 12 months before, smashing the government's own target of 2%. That's "Merv writes a letter to the chancellor explaining why inflation is out of control" territory.

It as has droped 2.1% in three months and is accelerating hardly a sign of general inflationary presure.
Based that 2.1% is of the 12 month figure a lot of prices must have gone negative the last three months.

Sir_Humphrey

!!!!!!? wrote: »

That's stagflation in my book.

I would prefer to use the English definition. No offence and all that.

kennyboy66_2

!!!!!!? wrote: »

s.

Lets look at the facts.

Commodities, equities, shipping - all have dropped like a stone over the last year.

Oil has went from super pricy to super cheap. Petrol/diesel probably as cheap as they are likely to get.

The high street retailers enter into a frenzy of price cutting to liquidate stocks of goods for ready cash as retail businesses go to the wall.

A VAT cut puts more downward pressure on prices.


Yet against all of this, consumer prices this December gone managed to be 3.1% higher than the Dec 12 months before, smashing the government's own target of 2%. That's "Merv writes a letter to the chancellor explaining why inflation is out of control" territory.

1) Why would equities falling have any impact on inflation ?
2) Shipping costs have negligible impact on end user consumer costs. They can have an impact on landed bulk low value raw materials (Ore, Coking coal etc)
3) I would guess that most of the £ fall has happened already (certainly against Euro, maybe more to come against US $)
4) Some of the VAT cut was negated by duty increases (Petrol, Beer, fags).

5) The so called frenzy of price cutting seems to be like a clever marketing ploy by retails which most of the media just swallow - cue stampeding hoards at some god-forsaken shopping centre. Difficult to see in the figures expect clothing, which has fallen for years, mainly as a result of Asian sourcing and huge over capacity.

Sir_Humphrey

kennyboy66 wrote: »

5) The so called frenzy of price cutting seems to be like a clever marketing ploy by retails which most of the media just swallow - cue stampeding hoards at some god-forsaken shopping centre. Difficult to see in the figures expect clothing, which has fallen for years, mainly as a result of Asian sourcing and huge over capacity.

I had to do some clothes and shoe shopping in December and January. Certainly at Westfield there were some very big discounts. Not every shop did it, mind you. I also bought a new mini system in January (my old one conked out 4 years ago) in a shop at a 10-15% sale price (genuine cut, I checked the internet price). I need new glasses, and have notice big sale prices on designer frames. As it happens, I have more cash than normal at the moment (as a result of being at the parents over Xmas mainly), but apart from the above I am finding little I want to spend it on. So into my ISA it goes.

purch

And more to the point, the true essentials ie food are still clearly going up

I went into Tescos today to buy a loaf of bread.

The missus only accepts Brace's or Warburtons

9 months or so ago, at the height of the inflation hype/scare they were selling for £ 1.24

Today it was £ 1.00.........:j