Deflation Watch pt 152

purch

So a devalued £

Yes a weak exchange rate will cause inflationary pressures, but raising interest rates will not solve that dilemma.

Generali

chucky wrote: »

but the again (being devil's advocate) the retail numbers (i think) are on the increase month on month.

can it still be the case?

From the British Retail Consortium who collate the retail sales data:

UK retail sales values fell 2.3% on a like-for-like basis from April 2009, when sales had picked up 4.6%, boosted then by Easter falling in April 2009 but March 2008. The April trading period included only Easter Sunday and Monday this year, but all of Easter in 2009. On a total basis, sales fell 0.2% against a 6.3% increase in April 2009.

http://www.brc.org.uk/details04.asp?id=1736&kCat=53&kData=2

Easter complicates things and I think retail sales had been rising up until the last time I looked probably in about Jan or Feb. A further complication is that I think these numbers are presented in nominal not real terms (that is not adjusted for the impact of inflation).

Per another of my posts, I suspect that adjusting for reduced spending levels is going to cause headaches for statisticians. To give an example, if the cost of what I bought in April 2009 compared to what that would cost in April 2010 has risen from £200 to £220 but I have decided to trim my spending and so my spending has fallen from £200 to £180, what has happened to my cost of living? The answer is hard even from that simple example. Looking at that across the economy is probably impossible.

purch

Looking at that across the economy is probably impossible

It won't stop them trying :eek:

lemonjelly

So given the above comments regarding the £, is it possible we could see action to raise the value of the £ as a means to reduce inflationary pressures? Or will other methods be used like a buy british campaign type thingy, or StevieJ's forecast impacts on inflation & we ride it out...?

Generali

purch wrote: »

It won't stop them trying :eek:

No and to be fair nor should it for 2 reasons:

- they need to produce an inflation figure to set pensions, index linked interest rates and for us to argue about
- you've paid them to produce an inflation figure so they should bloody well come up with the goods!

Wookster

I still think we are suffering biflation. Falling asset prices and increasing consumable/ commodity prices.

Generali

Wookster wrote: »

I still think we are suffering biflation. Falling asset prices and increasing consumable/ commodity prices.

I remain to be convinced by this argument. For example, how do mining company assets fit into this picture?

tomterm8

In terms of QE, not only has new issuance ended, currently interest payments and capital repayments on the bonds purchased must mean that QE is replaced with a small amount of QT... So, it should be having a slightly negative effect on the current money supply figures.

Paulgonnabedebtfree

I wouldn't be much good for the money supply either. Being in quite a bit of debt (mostly at reasonable rates), I'm caught between trying to hoard money (chance would be a fine thing ), and paying the minima from my debts OR paying off my debts as quickly as possible. Although I have unused credit on some cards, this would only get dipped into if I needed a big repair to my vehicle (the one I depend on for work). I'm under no illusions how quickly spare credit on a card can be removed without notice as I've already experienced some of this - even though I've not had a late payment for about 5 years.
It's a tough call. The only reason I'm starting to lean towards trying to hoard money is in case my current credit is removed when I may need it the most.
It's quite a catch 22 really - one I'm sure many people find themselves in. My non essential spending is practically zilch these days. Even my work boots leak LOL. Think I better get another pair .
Ironically I've worked myself into relative solvency (more coming in than going out (just)), yet a refusal by a card company to lend a relatively small amount to repair a vehicle could reverse that.
I can no longer rely on card companies not removing the facility so hoarding it is I think.

Generali

The latest provisional M4 numbers from the Bank of England:

http://www.bankofengland.co.uk/statistics/m4/current/index.htm

Seasonally adjusted provisional figures for May are as follows: M4 fell by £0.2 billion (0.0%), compared with an average fall for the previous six months of £1.7 billion. The twelve-month growth rate continued to fall, to 2.8% from 3.2% in April.


M4 lending decreased by £15.1 billion (0.6%) in May. The twelve-month growth rate fell to 2.5% from 4.1% in April.


M4 lending (excluding the effects of securitisations etc.) decreased by £15.1 billion (0.6%) in May. The twelve-month growth rate continued to fall, to 1.2% from 2.7% in April.
These provisional data can be affected by banks' and building societies' deposit and lending business with financial companies that are part of the same group, as well as repo and reverse repo activity with intermediate other financial corporations (OFCs). Most of these effects will be excluded from the measures of M4 and M4 lending excluding intermediate OFCs respectively, to be published in the Sectoral breakdown of aggregate M4 and M4 lending on 29 June 2010 (http://www.bankofengland.co.uk/statistics/fm4/2010.htm).

Money supply continues to fall. I can't see how prices can rise in the short-medium term while M4 is collapsing like this. I still don't see a happy ending here, regardless of whether you have Tory cuts or Labour stimulous.