Inflation hits 3%

Martinslovechild

The hope is that at least savers will benefit from higher interest as a result of inflationary pressures leading to Bank Rate rises. It's almost a certainty that Bank Rate will increase by another 0.25% in February.

Cheaper fuel won't filter through into CPI figures until Spring at the earliest, although the price of oil is easing off currently which should start to have an impact at some point. More disturbing is the big increase in the cost of raw materials. China has been buying up steel, copper & aluminium in big quantities and as a result helped to push up prices in the short-term, although again, these should fall back in the medium-term.

movieman

The problem is we've seen a doubling or more of most commodities in the last few years and yet apparently inflation was only 2%... so there are huge inflationary pressures in the system which we haven't even started to see come out in consumer prices yet. Companies have been cutting back costs (e.g. outsourcing, replacing retail stores with online sales) and reducing margins because they were too scared to increase prices... but there's only so long they can do that.

This is why I think we'll see 10% interest rates again before we see 5% rates again.

BTman

movieman wrote:

This is why I think we'll see 10% interest rates again before we see 5% rates again.

Let's hope so, as I'm doing nothing but saving at the moment and would rather be able to "afford" a house at 10% IR than stretch myself at 5% IR.

Time will tell...;)

talksalot81

realwildone wrote:

From the country's biggest liar.

I believe him - I think that the government will simply fiddle the criteria and use that to lower the number that they tell us.

movieman

I think that the government will simply fiddle the criteria and use that to lower the number that they tell us.

Too late; too many people can see that the numbers are nonsense every time they go to the shops... 3% is still under-reporting the real rate of inflation for most people as it's heavily biased by DVD players and other electronic goods that we rarely buy and can live without.

pricedout_1

Jon211 wrote:

I think a crash is only a certianty if people think it is. The housing market is vastly driven by sentiment.
The only reason it has kept on rising so much is the view that it will continue rising with people saying things such as 'You've got to get on the ladder now before prices rise too much.'

If the sentiment changes from this to 'You'd better wait for a while to let house prices come down a bit.' then demand will fall rapidly.

The tricky bit is predicting when this will happen!

Personally I was looking to buy (as a FTB) in Q2 of this year. Now I'm having second thoughts about things, not because of affordability issues, but because of uncertainty in the market.

Good point well made. Regardless of the figures, if you read between the lines (forums like this, papers, financial magazines such as Moneweek, Economist etc, and TV) what is the overall sentinment with regards to the housing market ? ......

As far as I can see it has indeed changed from 'You've got to get on the ladder now before prices rise too much.' to 'You'd better wait for a while to let house prices come down.' Once that is the general concensus the market will weaken

Generali

3% is still under-reporting the real rate of inflation for most people as it's heavily biased by DVD players and other electronic goods that we rarely buy and can live without.

Not sure of the methodology but on The Today Program this morning there was a claim that if you strip out the stuff you only buy once a month or less, inflation is 4.9%.

Pobby

Property crash?Yes I think so.With yields on buy to let getting thinner a lot of landlords will want to bail out.Factor in repairs,voids and all the other negative stuff btl is now not looking so rosey.Shortly{within a year}a lot of properties will hit the market at the same time.

Jon211

Generali wrote:

Not sure of the methodology but on The Today Program this morning there was a claim that if you strip out the stuff you only buy once a month or less, inflation is 4.9%.

Yep, you can get all the CPI data including the weightings used for the index from https://www.statistics.gov.uk

You notice gas and electricity going up because you have to pay for them regularly.

According to the data there is the same weighting given to "Electricity, gas and other fuels" as there is given to "Furniture, furnishings and carpets"

This is probably true over a period of many years, but given the you buy furniture, furnishings and carpets very irregularly you don't notice the increases (even though this category risen 10% in price since July)

Fuels have actually risen less than furniture in the same period (9.5% since July), but chances are when you go to buy a new 3 piece suite in 5 years time you won't remember exactly how much you paid for the last one. Indeed because it's been such a long time since you last bought one you expect the price to have significantly increased.

Generali

Just been looking at that, probably for the first time since my undergraduate days. Interesting, or at least it beats work for now.