Inflation, Inflation, Inflation...

CLAPTON

wotsthat wrote: »

If imported produce increases in price and the British produce is still more expensive what does your economics textbook tell you about how a consumer might react?

A positive might be that it forces retailers to be more competitive to help mitigate price increases but as marmite is £2.35 in all of them I wouldn't be holding my breath.

There's almost certainly going to be more expensive food/ grocery shopping on the way as a result of the Brexit vote triggering a devaluation of Sterling (for whatever reason). You could argue there won't be inflation or argue it's worth it but please stop making silly non-points.

in the unlikely event that ALL Uk produce is more expensive than imported then indeed economic theory would indeed predict that (all other things remaining the same) we would import all our produce
however, that is clearly not the case so there will be some substitution of imported produce by UK produce.

wotsthat

CLAPTON wrote: »

in the unlikely event that ALL Uk produce is more expensive than imported then indeed economic theory would indeed predict that (all other things remaining the same) we would import all our produce
however, that is clearly not the case so there will be some substitution of imported produce by UK produce.

..and at the end of this process consumers will be paying significantly more for their groceries. Well that's my prediction anyway.

but thanks for the economics lesson.

CLAPTON

wotsthat wrote: »

..and at the end of this process consumers will be paying significantly more for their groceries. Well that's my prediction anyway.

but thanks for the economics lesson.

-it is indeed normal economic theory that a large continuing balance of trade defict will lead, sooner or later, to devaluation
-it is indeed normal economic theory that devalue will lead to price increases of imported goods
-it is indeed normal economic theory that these price increase will lead to some substitution of imported goods by home produced goods
-it is normal economic theory that exports will rise due the the cheaper prices that foreigners will pay in their local currencies
-its normal theory that this will reduce the trade deficit and move towards zero or a positive
-its normal theory that this 'surplus ' means we can reduce foreign debt and/or invest profitablle in foreign businesses
-its normal theory that this reajustment will lead to higher inflows of dividends in the future.

-its normal economic theory that says a large trade deficit, funded by borrowing and selling businesses and other asset is unsustainable and will lead to devalue of the currency
-its normal economic theory that the longer the period of the deficit goes on and the larger the foreign debts become and the more of our assets have been sold and the lower our net foreign dividend flow becomes, the larger the eventual fall in the value of the currency.

michaels

wotsthat wrote: »

..and at the end of this process consumers will be paying significantly more for their groceries. Well that's my prediction anyway.

but thanks for the economics lesson.

Most food prices relate to the prices of internationally traded agricultural commodities priced in usd. A quick look at history shows these dollar prices swing wildly in dollar terms but that retail food prices don't vary by nearly as much. Prior to the referendum I was aguing that if we could pay world prices for our food rather than the tariff enhanced prices designed to protect French farmers we would pay less for our food but others argued that food input prices were a very small proportion of total food costs so the impact would be negligible.

HAMISH_MCTAVISH

michaels wrote: »

Most food prices relate to the prices of internationally traded agricultural commodities priced in usd. .

And no matter what the swings may be in USD it's an undeniable fact we'll pay more GBP for anything priced in dollars following the recent devaluation.

CLAPTON

HAMISH_MCTAVISH wrote: »

And no matter what the swings may be in USD it's an undeniable fact we'll pay more GBP for anything priced in dollars following the recent devaluation.

that is so
and it is an undeniable fact (unless one is a europhile acolyte) that devaluation was inevitable albeit at some time delayed, when our foreign debts would have been much higher.
Of course the amount of the inevitable (even if delayed) devaluation will depend upon whether you are 'remainer' or brexiter and so you are free to guess a very small number with absolute certainty.

worldtraveller

HAMISH_MCTAVISH wrote: »

And no matter what the swings may be in USD it's an undeniable fact we'll pay more GBP for anything priced in dollars following the recent devaluation.

Yes, I have no issue with that, whatsoever! But, I'm thinking about the UK and their production. The devaluation of GBP against other major currencies will mean that UK production, and jobs, will be on to a massive winner! Bring it on! Let's have a Marmite factory here in the UK, with UK jobs!

Fella

HAMISH_MCTAVISH wrote: »

And no matter what the swings may be in USD it's an undeniable fact we'll pay more GBP for anything priced in dollars following the recent devaluation.

Although (admittedly anecdotally) I've never noticed that products got any cheaper during those times when the pound rose strongly against the dollar. All Apple products for example, remained extortionately high to UK customers regardless of the value of sterling & I don't recall anytime this changed even when £ was worth about 1.7 $

cells

michaels wrote: »

Most food prices relate to the prices of internationally traded agricultural commodities priced in usd. A quick look at history shows these dollar prices swing wildly in dollar terms but that retail food prices don't vary by nearly as much. Prior to the referendum I was aguing that if we could pay world prices for our food rather than the tariff enhanced prices designed to protect French farmers we would pay less for our food but others argued that food input prices were a very small proportion of total food costs so the impact would be negligible.

Depends on the product for a lot of processed foods its true the underlying base ingredients make up a small fraction of the final retail price.

So for instence I noticed tesco has put up the price of it's bags of sugar by almost 20% but probably 80% of the goods it sells has some sugar in them but I don't think their prices are up at all.

Overall we can try to guess what the impact will be. About 20% of the UK diet is sugar and if the brexit has increased prices by 10p/kio you are looking at £250 million additional cost or about £4 per person.

Also this is not a total loss as about half the sugar consumed in the UK is grown in the UK so while consumers are down £250m British farmers should be up about £125m

You can repeats this exercise with the other base ingredients to get an overall figure for base ingredients. Roughly speaking its going to be sugar x 5. So consumers will be paying a bit over £1 billion more for base ingredients half to domestic farmers and half to foreign ones.

Food is the one thing I'm not worried about. I would not mind having zero tariffs on base ingredients and high tariffs on non base ingredient foods. That way the UK can import cheap base goods and process's them into the final forms in the UK.

As a guess the overall food price inflation is going to add £150 more per household per year. But as Clapton points out we might find that consumers substitute foods (although there not much getting around the base food cost increases)

CLAPTON

cells wrote: »

Food is the one thing I'm not worried about. I would not mind having zero tariffs on base ingredients and high tariffs on non base ingredient foods. That way the UK can import cheap base goods and process's them into the final forms in the UK.

no faith in the benefit of free trade then?