CPI falls to 3.6%

sheffield_lad

Inflation is not a worry for the gov June should see a big fall as it was June last year when food inflation dropped from its high increases. I would be very suprised if inflation was anywhere above the BOE target of 2% by the end of the year.

paulmapp8306

Simple - prices are NOT falling. I really dont care what statistics say - they can be made to say anything. And yes, I understand a fall in inflation is still a rise in prices just a smaller one.

HOWEVER.

My point is, things people NEED to live on - food/fuels/clothing etc continue to rise - quickly. this is the point - figures mean jack to the general public trying to make ends meet.

there ARE things that are falling. TVs, White goods, computers etc. Basically technology products (which alwatys happens as the tech gets cheaper to make) and more importantly LUXURY items. Why? because peopl cant afford them, because the price of basics are continuing to trise while income doesnt. The only way manufacturers/sellers of luxury items can sell them is to lower the prices - and cutting their profit by doing so.

It always galls me, when luxury items and house prices are included in such figures. I gurentee if you take the price of items NEEDED TO LIVE only - inflation is continuing to rise. this is what matters to 90%+ of the general populus.

paulmapp8306

Oh - I would also say - those talking about pay rise season around the corner are VERY lucky. For the majority of the population wages are frozen or at best below inflation. Many are still looking at pay reductions this year.

RUN_RABBIT_RUN

Graham_Devon wrote: »

But we will never know.

The news etc seem to be saying VAT is stripped out now.

call me cynical but i dont have much confidence in your average hack

from the FT -

http://www.ft.com/cms/s/0/d4e71d0a-56f1-11e1-be5e-00144feabdc0.html#axzz1mR74YbS6

'Economists expect the effects of the VAT increase to continue to play a role in pushing annual CPI inflation lower over the next month or two, because some retailers phased in the higher tax rate gradually last year.'

Graham_Devon wrote: »

I was quite annoyed to hear even Stephanie Flanders earlier suggesting we may find we are better off now, as inflation is falling. Were not better off at all, they are still increasing at a faster rate than wage increases.

yeah to be fair that is stretching it, we need the reverse to happen in order to actually be better off. tough times. maybe labour should dust off the 'things can only can better' song for their election campaign

oldvicar

howee wrote: »

Inflation is not a worry for the gov June should see a big fall as it was June last year when food inflation dropped from its high increases. I would be very suprised if inflation was anywhere above the BOE target of 2% by the end of the year.

I don't think the government is worried about a bit of excess inflation at all - just what the doctor ordered to help straighten out the public debt.

If June last year saw food inflation dropping then, unless it happens again, there will tend to be an uptick in the headline inflation rate rather than the big fall you suggest when the effect of this drops out this June.

I shall not be surprised if you are very surprised IYSWIM. Of course if inflation is above target at the end of this year it will be because of one-off factors - but there does seem to be a lot of them about these days.

Generali

oldvicar wrote: »

I don't think the government is worried about a bit of excess inflation at all - just what the doctor ordered to help straighten out the public debt.

Only unexpected inflation works to ease the debt burden. If the market expects high inflation then they demand higher coupons (interest payments) in return. All you do is shift the debt repayment from the end to today.

oldvicar wrote: »

If June last year saw food inflation dropping then, unless it happens again, there will tend to be an uptick in the headline inflation rate rather than the big fall you suggest when the effect of this drops out this June.

I shall not be surprised if you are very surprised IYSWIM. Of course if inflation is above target at the end of this year it will be because of one-off factors - but there does seem to be a lot of them about these days.

Below are the RPI figures for each month of last year:
Jan 229.0
Feb 231.3
Mar 232.5
Apr 234.4
May 235.2
Jun 235.2
Jul 234.7
Aug 236.1
Sep 237.9
Oct 238.0
Nov 238.5
Dec 239.4

Jan 2012 is 238.0 so the index has fallen from Dec to Jan which is normal. The RPI also tends to fall from Jun-Jul each year; it hasn't risen from Jun-Jul since the early 90s.

My guess is that failing something unforeseen, the index should be basically flat for the next 2 months at least which would see the RPI falling quite quickly.

oldvicar

Generali wrote: »

Only unexpected inflation works to ease the debt burden. If the market expects high inflation then they demand higher coupons (interest payments) in return. All you do is shift the debt repayment from the end to today.

Only future borrowing carries the higher coupon. Fortunately for UK govt only a small proportion of debt is rolled over each year. But I agree that 'unexpected' inflation is best, and so the pretence that we're fighting it.

Generali wrote: »

My guess is that failing something unforeseen, the index should be basically flat for the next 2 months at least which would see the RPI falling quite quickly.

Pedantically, if the index is flat then RPI isn't faling quickly - it is static (flat). You've fallen for the journalists trap of mixing up the Retail Price INDEX, with percentage annual changes to that index. I realise that you wouldn't usually be caught this way

oldvicar

The Bank Of England's Quarterly Inflation Report is due out today. I wonder what surprises there will be in store.

Generali

oldvicar wrote: »

Pedantically, if the index is flat then RPI isn't faling quickly - it is static (flat). You've fallen for the journalists trap of mixing up the Retail Price INDEX, with percentage annual changes to that index. I realise that you wouldn't usually be caught this way

Fair point. What I should have said is that if the monthly RPI figure stays flat then the annual rate of increase will fall quite quickly. To zero in fact. <D'oh! Smilie>

TBH it is hard to see what will drive inflation higher. The BoE 'printed' £75,000,000,000 last year I think yet still the money supply fell by £51,000,000,000.

I can't imagine that the series of sovereign defaults that look increasingly likely this year will do much for bank balance sheets and thus the amount of cash in the economy. Fractional reserve banking works both ways: the banking system can destroy money by not lending as easily as it can create money by lending.

Time will tell, as ever.

oldvicar

Generali wrote: »

Fair point. What I should have said is that if the monthly RPI figure stays flat then the annual rate of increase will fall quite quickly. To zero in fact. <D'oh! Smilie>

TBH it is hard to see what will drive inflation higher. The BoE 'printed' £75,000,000,000 last year I think yet still the money supply fell by £51,000,000,000.

I can't imagine that the series of sovereign defaults that look increasingly likely this year will do much for bank balance sheets and thus the amount of cash in the economy. Fractional reserve banking works both ways: the banking system can destroy money by not lending as easily as it can create money by lending.

Time will tell, as ever.

Don't worry about the £51,000,000,000 drop in money supply. That's just been fixed by printing another £50,000,000,000 - close enough.

Sovereign defaults are a worry. When they happen, I expect UK banks will be kept afloat by more BoE printy printy - so I'd be concerned about the longer term inflation outlook.