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Inflation: Consumers fight back?

Stephanie Flanders | 11:05 UK time, Tuesday, 12 April 2011

For once, a surprise in the opposite direction. City forecasters were expecting inflation to be broadly unchanged in March. Instead, the annual rate of inflation has fallen from 4.4% to 4% - thanks, in large part, to a 1.4% monthly fall in the price of food. There's also welcome news on the trade front: exports were 15% higher in the last three months than the same period last year.

With households so squeezed, it's been a puzzle how firms could pass on all these input price increases month after month. Taken alongside the bad news coming from retailers, today's figures might, just might, suggest that consumers are starting to say no.

However, the trend in inflation is still up: on the CPI measure, inflation averaged 3.4% in the last three months of 2010. The average for the first three months of 2011 has been 4.1%.

It's not just the Bank of England that's been taken by surprise by the level and persistence of inflation in the past few years - most City forecasters (and, as some of you delight in pointing out, Stephanomics) have been surprised as well. After all, inputs such as oil and other raw materials only represent a proportion of producers' costs. The cost of labour is usually much more important, and, until recently at least, wage costs were barely rising at all.

International food retail prices

 

To Danny Gabay, of Fathom Consulting, the forecasting errors suggest that companies have been doing more than pass on increases in costs - they have also been using the opportunity to increase their margins - especially food retailers.

Two charts make the point. The first shows international retail food prices and UK prices.

Food retailers' costs and prices

 

The gap between the UK and the rest of the world in 2008 and 2009 is easily explained by the fall in the exchange rate. But you can't pin the more recent price rise on the currency - sterling has been stable or rising in most of this period.

The second chart shows recent trends in food retail and wholesale prices, and wages.

Some of you will remember I debated UK food prices in a post last month. This time I'll let Danny Gabay make the point:

"For the retail sector as a whole, labour costs account for around 50% of the total cost base.
 
"Consequently, for a period where margins are stable, one would normally expect the green line showing increases in the retail price of food, to lie somewhere between the blue line, showing increases in the wholesale price of food, and the pink line, showing wage inflation in the retail sector as a whole.
 
"The fact that the retail price of food has, since the middle of last year, risen almost as much as the wholesale price of food at a time when wage inflation in the retail sector has been subdued, suggests to us that food retailers have been widening their margins."

These charts were created before today's figures came out. The fall in food prices in March may have changed the picture a little. But Bank of England economists have also puzzled over companies' ability to pass on price rises in such a subdued consumer environment. And the forecast for the next few months is still that the headline rate of inflation will go up.

Some point to the incentives facing managers in big corporations these days, which might encourage them to protect argins more zealously than the volume of sales. If so, it could be bad news for the economy, because it would suggest that it will take longer for inflation to work its way back to target than it might have done in the past, even when there is a considerable amount of slack in the economy. The fear would then be that we would only be able to get inflation back to 2% target with a prolonged period of sub-trend growth, which would itself be bad news for our long-term potential because some of our idle capacity would be lost forever.

We shall see. For the moment, consumers can take some good cheer from the reminder that inflation, like share prices, can go down as well as up.

Comments

Page 1 of 2

  • Comment number 1.

    "Taken alongside the bad news coming from retailers, today's figures might, just might, suggest that consumers are starting to say no." Is it more the case that they cant pay up and shut up.

  • Comment number 2.

    SF wrote: For the moment, consumers can take some good cheer from the reminder that inflation, like share prices, can go down as well as up.
    ------------------------------------------------------------------

    But this is not the case! Inflation is not coming down. Any positive inflation means prices are still rising. The rate of increase is less but inflation is still there.

    When share prices fall they cost less. When inflation rate falls things still cost more. A bad, even deceptive, analogy.

  • Comment number 3.

    Here comes the Depression.....

    Customers are trading down and buying and eating less expensive foods!

    On a wider economic note....

    Still the regulators have not taken on board their catastrophic management of asset price inflation and the absolutely critical need to correct the problem. It is absolutely impossible for the economy to grow when asset prices needs fro housing workers and production are so far above any rational level - all historical analogies suggest the house and commercial property prices MUST fall BEFORE we can get the economy going and THIS IS THE RESPONSIBILITY OF GOVERNMENT AND THEIR REGULATORS. (I am not saying who or which is the puppet of the other and/or the puppet of the banks!) But the situation has to be corrected before the economy can grow again and before more jobs can be created and before the economy can be rebalanced.

  • Comment number 4.

    Here comes the Depression.....

    Customers are trading down and buying and eating less expensive foods!

    On a wider economic note....

    Still the regulators have not taken on board their catastrophic management of asset price inflation and the absolutely critical need to correct the problem. It is absolutely impossible for the economy to grow when asset prices needs for housing workers and production are so far above any rational level - all historical analogies suggest that house and commercial property prices MUST fall BEFORE we can get the economy going and THIS IS THE RESPONSIBILITY OF GOVERNMENT AND THEIR REGULATORS. (I am not saying who or which is the puppet of the other and/or the puppet of the banks!) But the situation has to be corrected before the economy can grow again and before more jobs can be created and before the economy can be rebalanced.

  • Comment number 5.

    This does not mean inflation has fallen, and to try and frame it like it has is bad reporting. Inflation is 4% rather than 4.4, still far too high considering wage depreciation and low interest rates.

    I know for certain that my food bill has not fallen by 1.4%, it has risen by at least 10% in the last 6 months. I guess cheap electronics and online dating are keeping the inflation rate artificially and deceiptfully low.

  • Comment number 6.

    Can we start a campaign for a return to real inflation indexes. The BBC seemed to have adopted the CPI for a general measure of inflation without question when its only purpose seems to be to short change pensioners and those on benefits. Real inflation is more closely measured by RPI. Why has the 1.9% reduction in retail sales barely given a mention when it could presage a faltering economy.

    So is there real competition in the food retail market or are the supermarkets expert at pulling the wool over the consumers eyes - the figures suggest the latter.

    It will not be long before wage earners say enough is enough and we want pay increases to catch up with inflation.

  • Comment number 7.

    All that this tells us is that one of the many factors causing inflation, namely attempts by retailers to increase gross margin on the back of rising prices, has failed. It is a consequence of people having less to spend. Vide the recent drop in retail sales.

    Forward to value for money pricing in the High Street? About time, methinks.

  • Comment number 8.


    Evidence of my own Senses tells me Inflation over this last year is between 8% and 10% and not 4% to 5%.

    "Them Boyz is lyin Sherrif." ( "Deliverance" 1972)

  • Comment number 9.

    2. At 12:18pm 12th Apr 2011, Kit Green wrote:
    SF wrote: For the moment, consumers can take some good cheer from the reminder that inflation, like share prices, can go down as well as up.
    ------------------------------------------------------------------

    But this is not the case! Inflation is not coming down. Any positive inflation means prices are still rising. The rate of increase is less but inflation is still there.

    When share prices fall they cost less. When inflation rate falls things still cost more. A bad, even deceptive, analogy.

    .......
    Exactly. This is the key point. Prices are still going up, just not quite as much, but the trend is the same. And there is no end on sight. Still no reference to QE of the Dollar by Steph. No change there then.

  • Comment number 10.

    "However, the trend in inflation is still up: on the CPI measure, inflation averaged 3.4% in the last three months of 2010. The average for the first three months of 2011 has been 4.1%."

    Enough said...

  • Comment number 11.

    Is this the time for our 'big society' to 'be all in this together' and everyone suffer the introduction of a Prices, Incomes and Profits policy legislation?

    Other than 'cut and cut again' what are the governments economic and financial policies other than leave it to the free markets that got us into this unprecedented mess in the first place.

    Even the unenlightened socialist politicians of the 60/70s recognised that inflation is the 'real enemy of the people' and they acted, alas too late as usual.

  • Comment number 12.

    The dilemma for businesses will be the decision between margin and volume. Q1 2011 figures (published last week, see www.thebps.co.uk/news) from The British Marketing Survey show that compared to this time last year (Q1 2010) some sectors will see over 40% less customers. So, the only way to maintain sales volume will be by increasing market share.

    The figures also show that the number of people who think their financial situation will worsen has risen by 75% over the same period.

    So, even if inflation is driven down by lower demand and companies discounting to chase market share it may not improve consumers motivation or ability to spend.


  • Comment number 13.

    We need to use RPI as the real index - 5.3%. The MPC has missed its target for too long and needs to do its job and return interest rates to normal levels.

    I'm very surprised at some of the tone some of the BBC headlines. A 'fall' in interest rates, whoopee, the case is 'still over double the target'.

    The reporting of possible house price 'crashes', where I suggest any reduction in house prices would be a long overview 'correction' to previous norms.

    Have we not all agreed that the asset inflation of the last decade was a fraud/confidence trick derived by the many parasites the benefit in the short term. Your house that used to cost (X + compound interest) now costs (3X + compound interest) - it's only the banks and estate agents (and other parasites) that benefit from this, not the average John and Janet.

  • Comment number 14.

    I've always had an inkling that defaltion could possibly be our eventual problem, after all prices can't rise if consumers won't consume.

    In the end consumers may determine the course of inflation/deflation and I don't think we've seen the overall trend of the public attitude yet, things look onimous though for deflation if wages are constrained and consumers draw back. Saying that money supply says we should be in an inflationary cycle but I just have a feeling we could go the other way in say ten months.

    I will stick by my previous assertions though, interest rates aint going anywhere for quite some time whatever the rate of inflation, particularly now we've had one downward move indicating long term uncertainty.

  • Comment number 15.

    Whilst it is welcome that the headline annual rate of inflation has dipped it is still concerning that it is twice its official target level. So much remains to be done. Also I have seen a good blog post which poses a challenge to the numbers themselves.

    "If you have inflation measures it is preferable if they tell you the same story. We have had the problem in the UK for quite some time as RPI has for a while indicated a higher inflation rate than CPI. This month the difference has got wider as it was 1.1% last month and is now 1.3% as the annual rate of inflation as measured by RPI has fallen by only half that of CPI.

    Ironically house depreciation fell as an influence and as this cannot affect CPI as one of its flaws is that it does not allow for housing costs one initially might expect RPI to fall by more than CPI and not less! However food bread and cereal prices,which are this months strongest influence, have a higher weighting in the construction of CPI as do other downward influences such as air transport.

    There is a more technical point also as the rising price of new cars affects RPI more than CPI. This is a consequence of CPI using hedonics and a geometric index which for the uninitiated means that such influences as rising car prices as less likely to influence CPI. Some might call it sleight of hand."
    http://t.co/fkEvrQu





  • Comment number 16.

    Consumers say no.

    In many ways.

    For example, by paying down debt e.g. mortgages.

    A deleveraging process that will continue for quite some time.

    Coalition renewal pivots on a consumer based economic revival.

  • Comment number 17.

    If we're talking about clothes retailers it's probably my fault :-) I had to stop buying clothes when the food prices went up!

    I still find it difficult to understand how CPI can be only 4% when so many of the items I buy each week have gone up by 20-30% in the last 12-18 months. Petrol of course, but many food items (butter, cheese, bread, crisps, cakes, most fruit and veg). I don't know who has the shopping basket that showed 1.4% price reduction but I'd like to know where they shop . . .

  • Comment number 18.

    Actually the correct measure of inflation isn't even RPI, it's the even higher TPI (with that T standing for Tax). That's why you real inflation feels much higher than 4%. It is.

  • Comment number 19.

    KitGreen, Undyingcincinatus and Average Joe: Inflation is a *rate*. Much like slowing down a car still takes you further down the road and does not put your car in reverse; a drop in the rate will still take prices up as long as the rate is above zero. So inflation *has* dropped though prices haven't.

    Also, what does QE by the American Fed have anything to do with inflation?

  • Comment number 20.

    Maybe, just maybe the average consumer has started to realise that 80% of the goods and services offered are wants created by marketing rather than needs. So they are switching their reduced ability to spend to needs. Most of the rubbish pedalled by supermarkets for example is not needed. The supermarket we use for a few basics, milk, butter, dried goods and fresh items, has whole isles we never visit, pet food in ridiculous variety, so called snacks (basically crisps), breakfast cereals, sweet biscuits etc. Each one with its own isle. The only purpose of such products is to enrich owners and senior managers of the makers. This also applies to the vast majority of other goods on offer in most shops.

    One other point, its ok for ordinary folk to be surprised by this change in the rate of inflation but deeply worrying that all the so called experts are surprised. This simply shows that they don't understand the situation or that the logic/rules they use actually are wrong. It is like an electronics engineer calculating the current flowing in a circuit and getting the answer wrong consistently. You would either re-educate the person or replace them. Please could we do this with these so called economics experts, the economy no longer works the way they think it should (actually it never did) so could we have some new brains on the job.

  • Comment number 21.

    I think inflation is a bit of a con really and, in some ways, proof that capitalism doesn't really work, it a bit like a huge never ending Ponzi scheme.

    Many things should in fact get cheaper over time rather than more expensive and yet we seem to simply expect and accept inflation as a welcome norm.

    Personally, I feel a period of delfation would benefit people. It is always seen as an evil (due to the Japanese problem - which was actually a massive asset bubble; deflation being one of the outcomes).

    We are always told how damaging deflation is because it reduces demand and becomes self sustaining but look at the IT sector, deflation has existed there for decades and you could hardly say it's damaged it's growth.

    Whatever happened to the tag "Rip-off Britain" that was heard 3 or 4 years ago ? It seems even more appropriate now. Let's face it, food, energy and house prices are far too high in this country in comparison with our European and US peers.

    Anyway, enough nonsense from me... on a lighter note...

    "why did the two penguins jump when they first met ?"

    A: they were trying to break the ice :D
    I wonder why.

  • Comment number 22.

    "We shall see. For the moment, consumers can take some good cheer from the reminder that inflation, like share prices, can go down as well as up."

    Of course this is just plain wrong as has been pointed out in posts 2 and 10.
    I am amazed by the number of people out there who believe when they hear that the cost of living is going to 'fall' next year take this to mean that prices are literally going to get cheaper again.
    Its because they hear all these 'experts' on the news every month saying that interest rates don't need to go up because inflation will be 'coming down' in the medium term, and take it to mean that prices will actually get cheaper!
    Its got something to do with a generation of people used to good wages and cheap credit with no real experience of inflation impacting on their lives.
    I think when the penny drops, or when they are told the truth, and realise that they are looking at several years of falling real terms living standards, you will see more people wanting higher wages and being more proactive about getting them.

  • Comment number 23.

    I was amazed to find on Sunday that the price of petrol had dropped substantially, but that has probably not fed through yet.

  • Comment number 24.

    21. At 13:15pm 12th Apr 2011, Sigmar wrote:

    I think inflation is a bit of a con really and, in some ways, proof that capitalism doesn't really work, it a bit like a huge never ending Ponzi scheme.

    Many things should in fact get cheaper over time rather than more expensive and yet we seem to simply expect and accept inflation as a welcome norm."

    Inflation is caused, to a large part, by wage increases.

    People want wage increases, so the costs of producing things go up, so there's inflation, so people want more wage increases, and so on.

    This is why things like the Minimum Wage, and other 'good' things that unions have done are just flim flam. They sound good, but they push up inflation, which means that everyone needs more money to do the same. In the end, no one is better off than before.

    If fewer people got wage increases (except for promotions) then there would be downwards pressure on inflation (as now). If no one ever got wage increases (except for promotions) there would be no need for inflation at all.

  • Comment number 25.

    Just returned from France where shopping in a supermarket is obviously a last resort to the French - I suspect most shopping is done in the local markets where there is much competition for quality and price. This is what has been lost in the UK - competition. As previously mentioned, most of the large supermarkets can meddle with pricing far too easily and affect the economy in ways that we would not have seen twenty or thirty years ago. On my way home up to Scotland I called in to one of our favourite stores in Carlisle (primarily for petrol because it is cheaper, hooray for that) to visit the loo and my goodness what a difference between our countries, the place was mobbed with people, with shopping trolleys bursting - no sign of reduced buying here. This was last Sunday with the sun shining when we would expect people to take the family out to the beach or to relax in the garden - very sad. We've either lost too much time to work or there are just so few small shops still surviving that there is nowhere esle to go. Give us back real competition, then we'll see prices fall. The big stores must be laughing, when they see these small stores closing. In Scotland at least the SNP majority govt. has helped to reduce costs to small business through business rate relief - 100% relief for the smallest and a proposed hike in rates for larger business outlets (they're not at all happy because they cannot fiddle rates like they can with coproration tax). Let's see more of the same. If Cameron wants small business to drive the economy, he'll have to use measures like this to have any real effect.

  • Comment number 26.

    If the retailers have taken this oportunity to raise margins this is evidence that the competition commission failed consumers when investigating the large supermarkets that dominate our food retailing and increasingly many other items. Only yesterday a news report mentioned Tesco openning its tenth shop in one town (the same company £1 in £8 is spent with). These companies have killed choice, have held farming in a vice and are now making us pay more in a recession its about time they were seriosly challenged & stopped.
    We have weak regulation & weak government when it comes to consumer rights Im not advocating more red tape for business just targeting those that have become too large & distort competition

  • Comment number 27.

    4. At 12:26pm 12th Apr 2011, John_from_Hendon wrote:

    "...all historical analogies suggest that house and commercial property prices MUST fall BEFORE we can get the economy going and THIS IS THE RESPONSIBILITY OF GOVERNMENT AND THEIR REGULATORS. (I am not saying who or which is the puppet of the other and/or the puppet of the banks!) But the situation has to be corrected before the economy can grow again and before more jobs can be created and before the economy can be rebalanced."

    -----------------------------------------------------------------------------------------------

    You might well be right John, but this continuing fall in asset prices is crucifying all of the people who bought homes, business premises etc and/or leveraged equity on their property in the 4 or 5 years preceding the crash. That, plus the wages freeze/decreases, the loss of jobs (particularly in the public sector) and the continuing imported inflation on energy & energy-related costs (e.g. food, clothing etc) is what is behind the increaing drop in consumer confidence and activity.

    You seem to continually write about returning the value/cost of money to sensible norms but this just simply cannot happen until the individual and sovereign debts are reduced significantly or the wheels will just drop off the whole thing! Do you at least recognise this side effect to your usual position?

    However, as a suggestion; why don't we all have an opportunity renegotiate our personal debt liabilities to reflect a sensible, current, post-crash value of our assets; re-set the interest rates to historical average levels; and restart the whole thing based on traditional goods manufacturing, starting with the supply of our own things to our own market - including large government procurement projects, cars, electricals, food etc etc... Self-supply and self-reliance isn't necessarily protectionist evil!

    Sure there'll be losers - the banks will have to take a hit, but hey.... - but unless we do something radical and creative like that we are not ever getting out of this self-fulfilling tailspin; either by raising rates, or leaving them as is, or by inflation or deflation or biflation or whatever....

    Reboot, reload, start again!

  • Comment number 28.

    @21 Sigmar

    "Many things should in fact get cheaper over time rather than more expensive and yet we seem to simply expect and accept inflation as a welcome norm".

    Many things do get cheaper - cars, electronics, clothes etc. I bought my N reg Rover 200 for £12500 back in the day. Not only would I get a car for less today, it would be higher spec. Ditto TVs, etc. Many other items don't necessarily go down in price, but they get value added to them - computers is a classic case.

    Delivering better products for less (in real terms) is what capitalism does. It's just that now we are unwinding the crazy debt fuelled growth that has been brought about by the idiotic government policy of huge and sustained public debt. Still Labour don't care, it kept them in governemnt for an extra 2 terms.

  • Comment number 29.

    Donuts... last November my wife and I went into my local Morrisons store and were looking forward to buying a packet of donuts - five for 50p. Alas, they'd gone up to 65p - a 30 per cent increase - so we made do without.

    Shortly after Christmas, they were two packets for £1, but still 65p a packet. I couldn't see how my wife and I could eat 10 of them, lovely though they are, so again we made do without.

    Two weeks ago, they'd gone up to 69p for five. I reminisced about how they used to be 50p and thought back to that dark November night when I probably ate my last ever donut.

    Imagine my surprise and delight then, when buying a few crumbs from the rich man's table for lunch last Sunday, to see donuts were once again on sale for 50p for five. I suspected less raspberry jam but, no, they seemed much as I remembered them as we tucked in after lunch.

    The moral of this tale? Don't be tempted to pay inflated prices – eventually the price will come down.

    Now, where did I put the estate agent's number?

  • Comment number 30.

    As the basket of goods in the CPI is clearly some sort of average, I would love to know the details of this Mr & Mrs Average. E.g. what is the family income level used, and age of children. It seems like the measure has no meaning as there are clear differences between spending of different families. Some do not have enough to travel abroad and eat out. Others do this all the time. So when you mix everyone into the same pot, does the CPI actually have any true meaning to anyone? Surely a set of CPI figures, maybe 4 or 5 broad groupings, would be better.... so we could clearly see that certain types of families are suffering 8% inflation, whereas others only 2%, for example.

  • Comment number 31.

    In my view, you aint seen nothing yet. Five sixths of my working life is behind me; so in the next few years I have got to make massive increases in my DC contributions in order to pay for the recent VAT increase, (and possibly more to come?).

    This year my expenditure will be only 65p / pound compared to recent years. Next year onwards will see me further reducing my consumption by around 4p / pound compound PA. I, like many employees, am being told that times are tough and there will be no pay rise. Eventually the retail chains are going to have to notice that the public simply do not have the cash to spend.

  • Comment number 32.

    24. At 13:40pm 12th Apr 2011, Paul wrote:
    People want wage increases, so the costs of producing things go up, so there's inflation, so people want more wage increases, and so on.
    ------------------------------------------------------------------

    You are correct, but that is not the whole story.

    Reword it as Capital wants profit increases, so the price of things go up, so there's inflation, so capital wants more profit, and so on.

    This is still correct. Not all increased profit is from efficiency.

    This also ignores external factors related to supply and demand of raw materials and the influence of exchange rates on this.

    Wage inflation can be a cause or an effect. Which comes first is dependent on circumstances. It is far too simplistic just to blame the labour force.

  • Comment number 33.

    "even when there is a considerable amount of slack in the economy"

    This is the bit I don't get.

    The way I see it, we've not had any genuine "slack" in the economy since the 90s recession. The sudden emergence of an absolute ton of cheap manufacturing capacity after the end of the Cold War has, as far as I can see, meant that all those "when the economy grows, we'll need more X" jobs just don't exist here in Britain any more, so whilst there's undeniably "slack" out there, it's overseas, not here in Britain. All we've really since during the last twenty years is faked demand for labour through the unsustainable growth in both public and private borrowing, and now that mechanism is (quite rightly, I might add) grinding to a halt the reality of the situation is becoming apparent.

    Or, to put it another way, go for a poke around the high street and check out the "Made in" tags. That'll tell you where the "slack" is.

    tl;dr Before the "unemployed Brit" slack is taken up, the "unemployed* Chinese" slack must first be taken up.


    * Or under-paid...

  • Comment number 34.

    Oh dear. Again we seem to be playing the symptoms game, watching nervously each month for small tweaks in inflation measurements that are already highly dubious and understate the true inflation rate. What's missing is a bigger perspective on this - why are the BoE and the media obsessed with trivial monthly movements of questionable (albeit consistent) statistics? Are they too afraid to confront the bigger picture?

    The truth is that the UK, like most of the Western democracies, is facing the music after years of unsustainable borrowing and living above its means. There is currently a logical but painful reduction in living standards to the more modest levels that are justified by each society's productivity. Some peripheral countries, like Ireland, have gone bust. Others, like the UK, are slowly sliding back to reality, a process that can only be delayed (not halted or reversed) by government and monetary actions like QE - inflation is one of the symptoms of the "correction" of our living standards to their true level.

    At least the non-political bodies should come clean about this.

    Inflation is here to stay for the next few years, and it's going to get increasingly ugly.

  • Comment number 35.

    Stephanie

    An excellent analysis above.

    Can I make one correction however. You said on the BBC that the Bank of England had no control over the price of oil and other commodities. But commodities are priced in US dollars, and if the Bank increased short term interest rates it would strengthen the pound and thus reduce the price of commodities to us in pounds stirling.

  • Comment number 36.

    doesn't matter if I want to say yes, no money in the bank so no way of saying yes. I use the market, cheapest cuts of meat, mainly vegatarian diet, drive only to and from work, no heating (extra jumpers)... It can't go on like this, but unlike the CEO's of big companies us who do the work aren't getting pay rises. Eventually there will be a gulf. Then there are two choices for the cartel supermarkets - drop prices or have no customers. The price of these products on the world market isn't affected by my - or even Britains - problems, if the cartels think they can setup abroad and make more there then they will, for the moment they can't.

  • Comment number 37.

    #31. I, like many employees, am being told that times are tough and there will be no pay rise. Eventually the retail chains are going to have to notice that the public simply do not have the cash to spend.

    Because of this, all the retailers of discretionary items will be hiking prices over the next few years. If you don't have enough money for a new sofa you will not be in the sofa store, whether they are discounting a sofa £100 or not. And if you are in the market for a sofa and can afford to spend £450 on one, then you can probably afford to spend £500 on the same.

    What it will mean is that when you visit places you haven't been for a while you will notice there has been a large step change in prices since the previous visit.

  • Comment number 38.

    #32 Kit Green

    "Wage inflation can be a cause or an effect. Which comes first is dependent on circumstances. It is far too simplistic just to blame the labour force."

    Especially as the proportion of wages in National Income has been trending down for the last 30-40 years. It is at an almost all-time low. The ability of wages to influence prices is therefore also at rock-bottom. Price rises are therefore due to other market factors.

  • Comment number 39.

    #4 JFH
    "house and commercial property prices MUST fall BEFORE we can get the economy going"

    I went into my local bike shop recently and was dismayed to see "closing down sale" signs. I asked the owner what was the problem and it turned out that he was at the end of the lease and facing a massive "upwards-only" rent review (for a property in a reasonable secondary retail location.) Having failed to negotiate based on reality (lower takings due to the recession) he'd given up and decided to pack in.

    The problem is that the building stands in the books of the property company at a given capital value. This implies a given rental level. If the rental is reduced, it causes a write-down of the capital value. The property company would therefore prefer an empty building at an unattainable rent, than face a write-down of asset value (which may be security against loans).

    The unwinding of the bubble has a long way to go yet, and not just in housing...

  • Comment number 40.

    Strip out 'self-induced' inflation, Osborne's tax increases and that is minus 2% leaving 2%.

    One has to feel a modicum of sorrow for the BoE.

    They try to do their best, despite the politicians, who actually created most of this debt in the first place i.e. £320Bn (pre-1997 Tory administration) + £400Bn (NL Government).

    Obviously, the politicians would much rather than you blame somebody else, for example, those fat cat bankers (£120Bn, which we will recover, possibly with a profit), rather than fiscally incontinent politicians.

  • Comment number 41.

    27. At 13:50pm 12th Apr 2011, Russell wrote:
    However, as a suggestion; why don't we all have an opportunity renegotiate our personal debt liabilities to reflect a sensible, current, post-crash value of our assets;
    ---

    so the solution to silly people borrowing to much to fund extravigant lifestyles they couldn't afford is to write-off their debts at the expense of the sensible savers who's savings/investments would fall (equal and opposite reaction) to compensate.

    After you did this who would save anything?
    wouldn't everyone just borrow even more expecting everything to be written off again in the future?

  • Comment number 42.

    The regulatory bodies in the UK are a sham, a bad joke and that is why we are continually ripped off on prices from the petrol pump to the supermarket, from Utility prices to telephone and broadband charges.
    No other government of a developed country allows such profiteering go unchecked yet ours will happily join in - yes we also have amongst the highest taxes as well.

  • Comment number 43.

    Too few people able to pay higher prices is part of the growing gap between the haves and the have-nots. It's explained well by Nobel prize-winning economist Joseph Stigliz:

    http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105

  • Comment number 44.

    There are many factors at work here - ones we can't control like imported inflation due to increasing world demand for commodities and food, as well as supply problems from factors like poor harvest and the Japanese earthquake.

    Within the UK I'd propose the following analysis:

    Darling's Stimulus package of construction projects is now running out, as are the Olympic construction ones, so the economy is headed back to the post-credit crunch level - OTHER THINGS BEING EQUAL - which they aren't.

    Incomes are being squeezed both by the external factors, but also by the VAT rise, low/no pay rises and by increased bills generally.

    Taking £112 Bn out of the economy is BOUND to be recessionary - and when you add in people deleveraging their borrowing, the impact is going to show in a sharp fall in aggregate demand - and the high street is the tip of the iceberg that shows this today with retailers reporting their sales dropping off.

    IMHO we are headed for the mother of all recessions with the massive hike in oil prices and the PIIGS crisis likely to curtail demand for exports into the EU as well as the government's spending cuts.

    The "Budget for Growth" was no such thing - the loony libertarian deregulation brigade are not going to have any measurable impact on growth according to the OBR's forecasts by twiddling with business regulation, nor are their enterprise zones going to generate the 2M+ new jobs needed to stop the UK going into recession.

    What's next?

    Unemployment will be the next one to watch - the seasonally adjusted figures over the summer are going to balloon upwards as the spending cuts bite, tax revenue will fall, government borrowing will rise to pay the welfare bill and the UK economy will tip over the edge into recession.

    All you need to do to predict what's coming is to substitute the economic trend from 18 months ago in Eire, (which is about that much ahead of the UK in its economic cuts policy) to see what is going to happen.

    There will be a Sterling crisis next year accompanied by a housing price crash and as the recession grows in pace, unemployment will head towards 5M. Clegg & Cameron will have to go on their knees to the IMF and the only way out will probably be to join the Euro as keeping the Pound will become untenable due to the import inflation effect of continued devaluations.

    The UK will then be trapped in the same mess that the Japanese economy has suffered for a decade - stagnation, low growth and no way out - whole generations of people thrown on the scrapheap - and another generation of young people who may never get a job in their entire lives, another economic and social millstone around our necks, whilst the standard of living and quality of life continue to decline.

  • Comment number 45.

    The ONS are in dreamland!
    Bread and cereal prices have fallen in supermarkets since last year?
    asda warburtons white bread is now 15p a loaf more expensive, weetabix is 25p more expensive
    Food prices have fallen in march?
    asda have increased the price of soups, beans, pasta, tbags, coffee, butter (50%), etc.
    seems like everything i buy are the only things that supermarkets increase, uncanny that is!

    as for the ONS claims that air fares, games and toys have fallen.... what planet are they on?
    in 2011 a return flight to san francisco:
    january £580 (10% sale)
    feb £640 (still in 10% off sale with an advertised extra 5% off)
    march £730 (standard price)
    april its now £780
    increasing prices whilst advertising a sale???

    games and toys - normal games and toys have been replaced by the same game/toy but with film/tv endorsements on them and an extra £5 put on the price

    the ONS are completely out of touch with whats happening in the real world, by their comments today, it sounds more and more like they are linked to big businesses!

  • Comment number 46.

    #41. At 14:45pm 12th Apr 2011, HardWorkingHobbes wrote:

    "After you did this who would save anything?
    wouldn't everyone just borrow even more expecting everything to be written off again in the future?"

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    Not if there were proper controls in place.

  • Comment number 47.

    "The regulatory bodies in the UK are a sham, a bad joke and that is why we are continually ripped off on prices from the petrol pump to the supermarket, from Utility prices to telephone and broadband charges.
    No other government of a developed country allows such profiteering go unchecked yet ours will happily join in - yes we also have amongst the highest taxes as well."


    absolutely spot on!

  • Comment number 48.

    how is it that the current government are a big fan of choice and competition, yet in the food sector, the big supermarkets have total dominance and are allowed to kill competition before increasing prices... punishing us all?

    what, if anything, are the regulators doing about it?

  • Comment number 49.

    Along with the food and retail inflation is the price of petrol & diesel. A few years ago the whole country would be rioting about the current petrol prices. Now it's just accepted. What happened there?
    If my circumstances were different, I'd take my family and leave the UK.

  • Comment number 50.

    You can argue to the cow comes home about the figures, but its the reporting of the figures that i find the most interesting. The last months increase according to the media was the worst in years & the Country was in melt down, it dominated the news broardcasts for days. Does this fall mean were in utopia? of cause not. But maybe someone on the BBC can explain how they managed to find people who thought the end of the world was about to happen last month & this month they can find people who think the latest figures wont make any difference.

  • Comment number 51.

    41. At 14:45pm 12th Apr 2011, HardWorkingHobbes wrote:

    so the solution to silly people borrowing to much to fund extravigant lifestyles they couldn't afford is to write-off their debts at the expense of the sensible savers who's savings/investments would fall (equal and opposite reaction) to compensate.

    --------------------------------------------------------------------------------------------

    With respect mate, if people borrow money to buy a home for their family at the market price of the day, it doesn't make them 'silly' does it? Some people made up wages and deliberately borrowed more than they could pay back etc of course but I'm not talking about that.

    I was referring to people who borrowed within widely accepted sensible limits to buy modest homes and the ongoing effect on those hundreds and thousands of families of the fact that those homes are plummeting in value and my comment was in response to the, frankly, over simplistic view of many that simply putting up interest rates is going to cure all of these ills.

    I guarantee you that companies, countries, banks and individuals are going to increasingly start to default in all of this anyway and that is going to affect everybody - even those of you who have mercifully never been silly! In the event of any sort of resultant hyper-inflationary effect, the debts will actually evaporate anyway and all of your 'sensible savings' will be utterly worthless!

    Better I think to try to stabilise the thing so that everybody can start again, no?

  • Comment number 52.

    Will SOMEONE CHECK THE PESTON SITE NOT TAKING COMMENTS

  • Comment number 53.

    There is no fight back its far simpler than that, consumers don't have any money to spend. The condems stole from the poor to give to big business as tax cuts yet were unable to figure out if consumers have no money manufacturing and retail will be unable to sell anything hence short sightedness will cause the double dip and it will happen this summer. shame the BBC are too b busy being the tory parties PR department to critically look at what the condems are doing.
    shame on you

  • Comment number 54.

    Why is it always a surprise to the City, they get it wrong more often than right and often get the direction wrong too ?!!! Even with this reduction in inflation, it is still running at twice the target, and has been miles away from where it should be for an age. The policy of keeping interest rates low is ill conceived, and the Bank of England have failed in their duty of controlling inflation for at least a year.

  • Comment number 55.

    RE 51.

    I meant 'hundreds of thousands' of families of course....

  • Comment number 56.

    Prices are still increasing but just a less a rate. What I don't get is why it is so surprising? German inflation came in at an 'unexpected' rate too... http://howcome.co.uk/shortly/df/

    Things don't go in a straight line but it seems everyone expects it to. When it doesn't the media jumps on it like it is a change in the trend. There is still an inflation problem which the BOE needs to tackle. I won't hold my breath though.

  • Comment number 57.

    "It's not just the Bank of England that's been taken by surprise by the level and persistence of inflation in the past few years - most City forecasters (and, as some of you delight in pointing out, Stephanomics) have been surprised as well. "


    Don't make us out to be the bad guys. As I (among others) have pointed out: "Must be nice to have a job where guessing at everything is acceptable."

    I feel I said this before, but tough: As a computer programmer who has worked on traffic light systems and air traffic control software, if I took that approach, the country would be scr*wed.

    Simple question: now that two basic pillars of modern economics have been proven conclusively to be garbage (People will behave rationally when money is concerned and permanent growth is possible), do you not need to go retrain?

  • Comment number 58.

    Afternoon Stephanie,
    "Inflation -Consumers fight back" -how can we?
    We, the people, have no say in the level of bank rates, huge bailouts given to undeserving companies, huge amounts given in overseas aid to countries richer than our own, vast wastes of money on vanity projects like Olympics 2012 and so on. The people of Iceland and Ireland found out that their Government can commit the people to debts that are not of their making and can do nothing about it until election time.
    So how can we fight back against inflation which we all end up paying for?
    In my local supermarket it seems that the "value" brand shelves are always empty, the meat selection is repulsive, so we can't or won't buy these.
    Food inflation is only one small part of the published figures and I believe inflation is rampant across many areas of societies' consumption. In my case energy bills are now double last years, water has increased by 10% and the VAT increase is pernicious. On a fixed income, I have only been able to reduce my spending by a small amount by not spending £400 per year on newspapers.
    I am not unhappy with my lot however as we still have just enough money to be able to eat and keep warm (and feed the cat)!
    Many people out there in BBC land are now waking up to the idea that Government policies are going to affect them and that they are going to have to reduce their luxuries, like a trip to the pub on a Friday night, or their habitual shopping trip on a Saturday just to see what they could buy.
    I feel that the people who work in the Media, or in Politics live in a parallel universe to ordinary folk who are just trying to make ends meet from one week to the next.
    Why do we still have taxpayer subsidised food or drink in the House of Commons for example? Why do they deserve a subsidy on the vast salary and expenses that they make?
    It is certainly true that we are all equal as human beings but that some are more advantaged as consumers.

  • Comment number 59.

    I am surprised at you Stephanie.

    You easily know more about Economics than most people in this country, and easily more than the numpty Chancellor, yet your assesment instead of being realistic seems a little too up beat.

    Inflation is still twice what the target was, so any small fall is nothing to get excited about. It's probably just a blip. The endless highstreet sales cannot go on forever.

    I see the Chancellors friends are getting less as well.

    http://www.newstatesman.com/blogs/david-blanchflower/2011/04/dear-osborne-measures-imf

    The Tories....making a bigger mess....

  • Comment number 60.

    29 StuartReader

    `Don't be tempted to pay inflated prices – eventually the price will come down.'

    Well said that man!

    I will confess to being partial to a doughnut myself but for as long as the general public allows themselves to be ripped off then they will be ripped off.

    I recall years ago a group of ice cream vendors at Hyde Park being routed by a man who had the temerity to complain about the price of an ice cream. When the vendor told him to go forth he retaliated by organising the queue and us passers-by into an immediate protest demonstration.

    My question to the people of Britain is why do you put up with it?

  • Comment number 61.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 62.

    There is in old saying that no one can dispute - when retailers charge silley prices - vote with your wallet. Customers forget that they have a very real power!

  • Comment number 63.

    Anyone who finds anything good about these figures is living in a fool’s paradise and fails to understand the concept of inflation. But what is bigger news is the scandalous exploitation of the British public by the food retailers in this country and the way their manipulations can cause an apparent dip in the inflation rate. It’s high time they were reined in like the banks; these are the real drains on us all.

  • Comment number 64.

    "I am surprised at you Stephanie.

    You easily know more about Economics than most people in this country, and easily more than the numpty Chancellor, yet your assesment instead of being realistic seems a little too up beat."

    Interesting point of view...I doubt you could possibly back these statements up with any evidence I would consider remotely credible.

    And when I say doubt...you could read that as 'know', if you like.

  • Comment number 65.

    Well, food might be down a bit but as for fuel and...motor insurance. Wait for it, I was asked for a 45% increase in my premium over last year's, despite no claims. "All the insurers will be doing this" I'm told, but no-one could explain why. You almost wish they'd come out with it and say "because we want a lot more of your money", the true reason.

    Time to look round, again, I suppose...

  • Comment number 66.

    It's like saying the Titanic isn't sinking cause the deckchairs are floating.

    The things they say have slowed are discretionary items, things you don't _have_ to buy, like air travel, electronic items - even with food, there's always cheaper food you can buy assuming we're not already all living off boiled rice and economy baked beans. It's the underlying essentials that are going skyward, such as energy, fuel, insurance. Insurance has gone up 30% in the last year, and there is no way for consumers to vote with their wallet, you have to insure your car.

    I really don't think inflation should be shopping basket focused. That's not where the majority of people's money goes now, it's not the 1970s.

  • Comment number 67.

    the condems and teh BBC need to understand two things
    looking out for the other guy isn’t just good for the soul—it’s good for business
    and the fate of teh rich in the end is bound to the fate of the rest.
    By constantly giving to teh megga rich by stealing from the poor they ensure that the lower paid have no money to spend hence the shops take less and the profits the condems dreamed that industry and retail were going to use to make all these imaginary jobs just was not there, and thuis their rich business friends they were so desperatly trying to make even richer end up falling too.
    You cant get a recovery based on growth when you have stolen all the peoples money. Its basic econmics 101 shame the condems and the BBC dont understand such basic things.

  • Comment number 68.

    There is an old management saw which goes 'If you can't measure it, you can't manage it".

    However, in economics, especially when filtered through the political prism, it turns out there are a myriad ways of measuring it.

    Maybe it would be more honest to just say we make up as we go along ... but who is interested in honesty?

    I could tell you about my life and keep you amused for sure ...

  • Comment number 69.

    #27. Russell wrote:

    "why don't we all have an opportunity renegotiate our personal debt liabilities to reflect a sensible, current, post-crash value of our assets;"

    You mean to commit an act of bankruptcy - a composition with your creditors - that is what you are suggesting - a sensible choice fro those who will never be able to pay off their debts. That is I believe quite clearly the legal position of you 'suggestion'. This is inevitable and I am pleased that you understand this.

    (By the way your assets will be disposed of by the court for the benefit of your creditors as you are bankrupt.)

    The calamitous position that the Nation is in should soon dawn on everyone! Then we can get to grips with it as this is the ONLY way to avoid twenty to thirty or more years of Depression.

  • Comment number 70.

    The vast majority of the posts above are spot on (especially #34), but they all miss one question: what will 100,000s of people who have stayed in line all their lives then had everything taken away, do en masse?

    I'm no doom and gloom merchant but when some of the worst case scenarios are very worrying.

    Lets also face it that most younger people (who know nothing other than living in the fantasy of the economic heist that has taken place over the last 10 years) just aren’t equipped to handle real life!

  • Comment number 71.

    Great to be British! A land governed by non-elected bankers. I didn't cause the overspend, and the Tories, when in opposition, didn't do much about it either.
    Don't get me started - no wonder inflation is coming down, without demand for goods and services prices are bound to fall, if the BofE thinks now is the time to raise interest rates they are wrong!! We are still in recession, I don't care what the experts say. I have to earn and live in the real world and in isn't easy. England doesn't end on the outskirts of London. When inflation is caused mainly by Government putting up fuel duty and VAT and then blame circumstances beyond their control it makes be sick to the stomach, oh to be a millionaire like most of the Tory government.

  • Comment number 72.

    Great: so as the economy splutters, and we all suffer, the big supermarkets use the opportunity to gouge their customers and consolidate their strangleholds.

    Supermarkets: Bankers in Polyester.

  • Comment number 73.

    Excuse me for saying so Stephanie, but what a stupid question to ask Joe Public on that Vox Pop clip on the news, i.e. "Is inflation going down".

    Of course it isn't. It has still gone up by 4% over the last 12 months. True it might be going up less slowly, but it isn't coming down...!

    As for the consumer fighting back, doing whatever they can to make ends meet...

    ...I no longer have a private car. I sold it recently. Not everybody is going to be able to do this, but I can and I now benefit from not having to pay £600 tax and insurance, just for the privilege of having it sat in the garage going nowhere for 5 days every week. And as I don't need to buy petrol now, I am not being taxed twice on that. That makes me feel "happier" (another topic in the news today!).

    So its not just consumers fighting back against retailers.

    We are saying "Up Yours" to HM Treasury too...!

  • Comment number 74.

    #70 wrote "What will 100,000s of people who have stayed in line all their lives then had everything taken away, do en masse? I'm no doom and gloom merchant but when some of the worst case scenarios are very worrying. Lets also face it that most younger people...just aren’t equipped to handle real life!"

    It is a good point you make. In my post #34 I say that the future may well be ugly and this is what I had in mind. The current spasms of inflation may spiral into a major wipeout of savings and stability, with inevitable social fallout. The effects on social cohesion, crime, and race relations may be grim indeed. Let us not forget our history - inflation was a major contributor to the rise of German national socialism and its obscene leader, Hitler.

    Instead of fretting over official inflation rate changes of decimal-point magnitude, I wish the media, government and BoE would address the bigger picture of the potentially catastrophic impact of rampant inflation. I feel that we are standing on the edge of a cliff, social as well as economic.

  • Comment number 75.

    Consumers are not fighting back. Cuts have hardly begun to bite yet, but the average man already has less money in his pocket, so is forced to cut back on his discretionary spending - it is not a deliberate fight back.

    The impact of cuts to come will see this trend continue, and retailers will respond in a variety of ways. Some will discount to increase market share, some will cut costs (staff and premises being the main costs), some will try to increase their margins on "must-have" goods to make up for lost profits on other goods, some will need to seek assistance from the banks (I think "LOL" is the appopriate blogspeak at this point) to overcome cash flow problems until they adjust to the new reality, and some will simply disappear from our high streets for good.

    The concentration on small percentage point changes in the inflation rate is both tedious and irrelevant. Everyone is experiencing their own personal rate of inflation and, for many, this bears no relation to the official rate (using whatever measure). It is these personal rates of inflation which will impact on the economy far more than any official figure.

  • Comment number 76.

    100 years of government run crony capitalism and this is where we are. If you consider how unproductive this nation is, that we produce very little and export very little it is absolutely incredible that it has taken this long. Boy those guys really know how to kick a can.

    There are some critical comments about supermarkets here. Considering that sterling has devalued at least 20%, that oil at $125 is fundamental to the production of food, and that nations that historically could not afford to eat like us suddenly can in increasing numbers, it is amazing how low food prices have been kept. In a highly competitive market, supermarkets are promoting like mad just to stand still. Contrary to popular belief the suppliers do not fund all of this. Still, don't let that stop you posting on subjects that you know nothing about.

    We are getting poorer each year against the rest of the world and it is the governments (of all colours) that are to blame.

  • Comment number 77.

    As already stated, inflation is still there, not just as high as in February but why?

    On the day retailers report they have suffered the worst fall in sales since record began, it is apparent the fall in inflation is due to retailers under cutting each other trying to get custom. As much as that is good for customers it is bad for the retailer and the economy as less profits will lead to more lay offs.

    The powers that be are trying to put a positive spin on any slight bit of good news but the underlying statistics indicate a long hard depression is coming.

  • Comment number 78.

    Inflation: Consumers fight back?

    NO! The INS have fudged the CPI basket and figures!

    http://www.bbc.co.uk/news/business-12744400
    Changes to inflation basket
    IN
    Smartphone handsets and their apps
    Dating agency fees
    Hair conditioner
    Pork shoulder
    Dried fruit
    Sparkling wine
    Medium density fibreboard (MDF)
    Craft kit
    OUT
    Mobile phone downloads
    Vending machine cigarettes
    Rose bushes
    Oven-ready joint
    Dried fruit
    Vet fees for spaying a kitten
    Hardboard

    The question is ... Have these changes emerged in the March 2011 UK CPI figures?

  • Comment number 79.

    69. At 17:18pm 12th Apr 2011, John_from_Hendon wrote:
    #27. Russell wrote:

    "why don't we all have an opportunity renegotiate our personal debt liabilities to reflect a sensible, current, post-crash value of our assets;"

    You mean to commit an act of bankruptcy - a composition with your creditors - that is what you are suggesting - a sensible choice fro those who will never be able to pay off their debts. That is I believe quite clearly the legal position of you 'suggestion'. This is inevitable and I am pleased that you understand this.

    (By the way your assets will be disposed of by the court for the benefit of your creditors as you are bankrupt.)

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    But they won't John. The major problem is unsecured debt which will be written off in part by means of an IVA, these are rising significantly at the moment. The lenders will accept as little as 20p in the pound to get something back at least, the borrower will keep all their assets and property will remain inflated. Lenders may pursue bankruptcy but if the borrower has means to pay something the courts will judge in their favour, some lenders may insist on up to 50p in the and refuse the IVA proposals but why would they if they risk getting nothing.

    You have to be really at the end of your financial tether to be declared bankrupt as an individual these days, the courts are protecting the asset bubble as well I think you'll find. The creation of IVA's wasn't just to protect people from bankruptcy it is a means of dumping debt without dumping assets very much in the corporate interest so just who is protecting who here.

    Borrowers are quite savvy now, they know if they pay their mortgage at least all their unsecured debt can go to hell and back with only a token threat of courts and securitisation against your house which never ends up in possession, after all the original premise is the debt was unsecured. When everyone realises the loanshark banks have little means of legal recovery of unsecured debt it will be deleveraged make no mistake of that. Unlawful isn't illegal, and non-payment of debts is unlawful.


  • Comment number 80.

    The crucial thing about this data and the subsequent analysis, it seems to me, is that it means margins are being squeezed. As Stephanie rightly points out, this hurts "growth".

    But who cares? And why? The answer is that government cares, because the wise men (*cough*) believe that growth equates to increased tax revenues. And so it does, much of the time.

    But tax revenue is far more dependent on margins than it is on growth. If you have rapidly diminishing margins, as we appear to have now, due to consumer pressure, you likewise have rapidly diminishing taxation revenues. This is because a very large percentage of revenues come from profits, and no margin means no profit at all, even if you survive.

    So the UK is going to experience rapidly shrinking tax revenues from profit sources, and will need to seek tax revenues from "somewhere else".

    Our choice for "somewhere else" are fixed capital assets, and the moon.

    So if and when the wise men work out that they will need to exert some radical title on the property of the crown, that should be interesting.

    Who will go first, do you think?

  • Comment number 81.

    60. At 16:09pm 12th Apr 2011, stanilic wrote:
    29 StuartReader

    `Don't be tempted to pay inflated prices – eventually the price will come down.'

    Well said that man!”
    I read SRs post earlier and wanted to say just that; so “Well said that man!” x 2


    “I recall years ago a group of ice cream vendors at Hyde Park being routed by a man who had the temerity to complain about the price of an ice cream. When the vendor told him to go forth he retaliated by organising the queue and us passers-by into an immediate protest demonstration.”

    “My question to the people of Britain is why do you put up with it?”

    My answer is: because we could just about afford it. Or more likely we had just enough cheap credit to fund us. No longer is that the case; and we are only in April.

    Substitute ‘ice cream vender’ for ‘markets/supermarkets’ and substitute ‘ice cream’ for ‘sustenance’. I’ll let you substitute ‘an immediate protest demonstration’ for whatever you deem appropriate.

    I would like to repeat - `Don't be tempted to pay inflated prices – eventually the price will come down.'

  • Comment number 82.

    65. At 16:52pm 12th Apr 2011, Eddy from Waring wrote:
    “Well, food might be down a bit but as for fuel and...motor insurance. Wait for it, I was asked for a 45% increase in my premium over last year's, despite no claims. "All the insurers will be doing this" I'm told, but no-one could explain why. You almost wish they'd come out with it and say "because we want a lot more of your money", the true reason.

    Time to look round, again, I suppose...”

    Last year a red phone and red mouse tried to increase mine from £450 to £850. I have full no claims, no speeding fines (for over ten years) and no accidents on my record (hence my NC I suppose).

    I did look around, websites and independent phones calls. A friend said ‘join a union and you’ll get a discount.’ Six fifty I got it down to. Even adding in the union fees it is much lower than the £850 renewal. Da dah da dah da darh. Beep beep.

  • Comment number 83.

    78. Bit of an insult isn't it ... the nanny state INS now thinking that we're all having to pay more for our 'dating agency fees'

    I pleased to say ... mine are still nil!

  • Comment number 84.

    If food retailers are able to increase their margins while competition for jobs holds down earnings,that represents a transfer of income to employers.

    Generalized across the economy it represents a transfer of income from Labour to capital.A trend which was already well established before the economic crisis.From 1980 to 2010,it is estimated that the share of GDP going to capital has risen from 22% to 27%.

    The government executes a similar transfer through inflation and taxes.While VAT and NI rises,corporation tax is being reduced from 28% to 24%,capital allowances increased to £2 million.

    Inflation is also a transfer of resources to the government.Earnings in the public sector have been frozen for two years,over the same period prices have risen sharply so the real value of wages and salaries has fallen by 6-8%.The value of government debt not index linked has fallen by a similar amount.That`s another reason why there is no rush to raise interest rates and reduce inflation.

    The interests of government and capital dominate.Let`s hope the private sector is capable of the economic transformation the Tories hope for it.



    Middle class incomes have been static or falling for a generation.

  • Comment number 85.

    I recall that during the frightening inflation of the 70's people were in the habit of differentiating the rate of inflation as often as necessary in order to see a glimmer of light at the end of the tunnel. So the rate of the rate has decreased, no doubt if the rate increases next month we will be looking at the rate of the rate of the rate. Look, we can't pay our debts at the value at which they were incurred, so over the next few years we will devalue to short change our overseas creditors and have price inflation far in excess of wage inflation and interest rates in order to short change our domestic ones. Our banks invested our savings foolishly and we are all having to pay the price. The rest is crying over spilled milk,

    Yours Aye,

    Graucho

  • Comment number 86.

    #79. NorthSeaHalibut wrote:

    JFH: "You mean to commit an act of bankruptcy - a composition with your creditors - that is what you are suggesting - a sensible choice for those who will never be able to pay off their debts. That is I believe quite clearly the legal position of your 'suggestion'. This is inevitable and I am pleased that you understand this. (By the way your assets will be disposed of by the court for the benefit of your creditors as you are bankrupt.)"

    NSH:" But they won't John .... etc"

    And this is why we are condemned to repeating the Long Depression of the 1870s (which itself lasted 23 years in the UK) which was the result of a property bubble.

    If we are being responsible I consider it the right thing to do to point this out and to suggest that there are better ways of getting the economy going more quickly. I am as you may recall impressed by the relationship between getting debts deflated as rapidly as possible and thereby generating a recovery. The past is another country - it is the future that matters and to my mind old debts need deflating in a legal manner and the best manner is bankruptcy, possession and subsequent sale at what ever they will realise. That way the productive asset base of the country is made available fro productive use at sensible and competitive prices. I repeat that when a farm cottage is priced at six times the maximum rational loan for a worker this has to be corrected and until it is the economy will remain depressed and the country stagnate and rot.

  • Comment number 87.

    Well inflation is still up, for those lucky enough to get a pay rise so long as it's around 8% they may just be about even, I don't know anyone who has had a pay rise in the last year, & many have not had 1 for 2-3 years.

    I own a retail shop & a online business & it's that tough for us that on a £5 or £10 sale the government get more from the sale than my business does in profits, I want to know how this can be right.

    My retail sales in the shop have gone down by around 15% on average over a month, this has meant the differance for us of struggling to break even.

    Our internet sales have also gone down, the staff I employ though not that many some of them may have to be made redundant.

    The government are not helping us at all there are lots of things wrong with things but the worst is Oil & fuel prices, I'm staggerd by the way the oil & energy suppliers can ramp up the prices, unless these greedy git's can be stopped inflation will be here to stay & your disposable income if you have any will be slowy eroded to nothing.

    We also need to start making products in this country again, we need massive investment in manufacturing, it's one reason why Germany does so well. When we get many more workers working & the country making things & we can buy british & export the goods we will do well again, the country's tax take will go up, it's the only way out of this mess.

  • Comment number 88.

    Fascinating stuff is inflation. To reduce your overall cost of living you need to box clever. I have no idea about what I spent last year against this year but there are deals to be had to cut your personal inflation rates.

    Household fuel - my current provider increased my standing charges for dual fuel by 200% and then said I was better off switching to another tariff. I switched out altogether to save myself around £300 in the coming year.

    I foolishly pay for Private Health Insurance so my current provider increased my costs by around 14%. So I switched to a fixed deal for 5 years at the same cost.

    My wife's Car Insurance leapt for no reason by 35%. I checked other rates and a company in the same group proposed an increase of around 3%. The current provider matched the cost.

    I went into Tesco and chose some dried fruit in a bag for £1.05p for 150 grams. Another shelf had the same fruit for 69p for 500 gramms. I swapped.

    Every time I see a deal reducing the price of something I usually buy, I go overboard for the deal. Why not?

    The moral of the these tales. Smartass - no. I went through the 70's and each little reduction helps.

    My overall inflation - haven't a clue. But I do feel better and I am saving money!

  • Comment number 89.

    Inflation is falling- Such a weird and distorted analogy. This is shame that people in position like this are trying to misled and create rosy picture out of nothing. The inflation on the back of 4.5 to 4 is far far worse than any hard working person in this country can afford it. I do not understand when Mervyn King starts to value the savers more than spenders. This country needs to save rather than spend. Keeping artificially low interest rates have helped only banks and fat cat bankers. This has not been passed to anyone. By raising interest rates if we could incentivise saving that might create a good pool of the money, on which better UK future will be built. I am sure as now Brown is repenting, few years later King will repent for following Americans rather than think for the Britain. It will be too late to recover by that time, King! Come on wake up, it's time to raise the interest rates and not to be an Ostrich. Oh! for gods sake get a grip on inflation else Bank of England will turn into bunch of incompetent Ostriches who sit in once in a month, drink tax payer paid coffee and bury their heads in the sand.

  • Comment number 90.

    The drop in year-on-year inflation is non-existent! There was a big jump in the cost of living in March 2010 which has now dropped out of the calculation. There was another big jump in April 2010, so the headlines in a month's time will say there is another drop. Meanwhile the prices are still going up.

  • Comment number 91.

    Surprise fall in inflation to 4%...

    Worst retail sales figures since records began, down 1.9%…

    BOE interest rate 0.5%...

    London property prices rose by 3.7% (April 2010 to April 2011)
    Source http://www.propertyenvy.co.uk/property-market/2011/04/08/london-property-prices-rose-by-3-7-over-the-year-says-lsl

    There’s something badly amiss here?

    Of course overseas buyers are blamed for the London housing bubble (what does this mean I wonder?), inflation will be re-aligned upwards later I suspect and (I also suspect) that many retailers will go to the wall this year (big and small), quickly followed buy their support services or transport companies by the dozen which reside mostly in the midlands.

    With inflation at (it’s only a guess) 4% and wages declining in real terms (unless you’re a banker) and legislation in “the pipe” that will further dramatically restrict an employees legal rights in the UK unless you can prove certain grounds based on race, gender and so on and legislation already in place to curb the traditional trade union’s “matching wages to inflation” and draconian laws on trade union activities that used to act as a balance not to mention the other legislation regarding bringing the social housing rents (for those on benefits) having to reflect the going commercial rates for the area concerned – 25% (I think for new tenants)… where will this all end?

    Well my guess is that employing a cleaner in (say) Westminster, Kensington and Chelsea or Islington are set to go through the roof, tradesmen/women likewise, maintaining your underground heated swimming pool and paying the servants will escalate beyond imagination, even the humble limo driver (what is his name again Nigel?) we are so used to transporting us everywhere will have to commute from Gillingham, so the cost will be passed on (50% upwards or more).

    Boris was right; this is ethnic cleansing but the powers that be haven’t thought the issues through.

    Yes I know that outside of London and the South East things are different but my whole point is… is that they should not be, it’s the financials institutions based in the capital that have caused this and the sooner the “asset” bubble is collapsed the better. This will have major ramifications only for London and the South East and in my opinion for the better.

  • Comment number 92.

    87. At 22:35pm 12th Apr 2011, Nigel wrote:

    We also need to start making products in this country again, we need massive investment in manufacturing, it's one reason why Germany does so well. When we get many more workers working & the country making things & we can buy british & export the goods we will do well again, the country's tax take will go up, it's the only way out of this mess.


    Unfortunately we decided to buy and sell very expensive houses to each other...

  • Comment number 93.

    Why can you only "complain about comment" on this - how about "Vote Up"?
    Some brilliant well informed comments below!

  • Comment number 94.

    @93

    +1

  • Comment number 95.

    'Consumers fight back'

    What is the effect of this on employment? If we look at the retail sector this is a problem. There is a squeeze on producers or on their own staff. Beyond a certain point a producer cannot cut costs other than by shedding jobs. Similarly a retailer can force down prices from it suppliers leading to pressure on home employment of seeking other markets by overseas suppliers, or they can cut jobs.

    The point is that consumers fighting back leads to unemployment and fewer new jobs. A case where great 'big picture' figures have a dramatic negative effect on individuals lives.

  • Comment number 96.

    The reduction in cost push inflation is only temporary as the trend in embedded UK inflation still very strong. UK inflation will take off and upwards again, when the global market picks up pace as the UK is almost totally reliant on imports and with an excessive population level for our cost and resource base ... it will not be long before inflation really bites hard ... we've seen nothing yet.

    The case for raising interest rates to modest levels is that it also helps our exporters and importers buy raw materails and commodities as the GBP exchanage rate is stronger. But with zero debate about the net balancing costs and effects and weak startegic management of the UK economy ... the style of management is that something will happen when it happens as continuing 'crisis management'.

    When is the BOE going to talk about inflation real economic terms:

    Demand side inflation
    Supply side inflation - influence of import prices, monopolies, cartels etc

    and explain in plain economic terms how it intend to tackle these issues.

    The spivving supermarket cartels are demonstrating how easy it is for them to play with the British consumer, owing to their exhorbitant cartel 'over-privilege'.

    When is the ONS going to confine the inflation basket to essential items rather than a 'fudging basket' spread across all income levels and some items specifically targeting the better off with economic issues on marginal cost and income levels relativity?

    Surely, CPI should only relate to absolutely essential items ... and which would probably show a higher CPI rate?

  • Comment number 97.

    I heard on Radio 4 Today today that the 'the cost of living had done down' as the popular interpretation of the fall in the rate of inflation.

    Why do reporters say such ignorant things? Is it that they have a political motive to deliberately mislead the public? Or are they just stupid and arithmetically ignorant?

    Yesterday's published figure was a fall in the rate of increase in the cost of living this is not how it was represented on the Today Programme - the country's premier news programme - if Radio 4 Today's programme can get it right always and if their editors are so asleep at their jobs they don't correct the misleading data what are they for and what is going on.

    The CPI (and the RPI) are hugely misleading indices when the structure of expenditure is changing as is most likely happening today. The 'facts' that they purport to represent are dangerously erroneous. Many previous posters have suggested that the effect of price increased in essentials (such as fuel to get to work) has a distorting structural effect on expenditure and because of the nature of the way the basket is made up this will not be effectively mirrored in the CPI (or RPI) indices.

    We need an index that should how much money people have left at the end of the month as that would show how fiducially challenged the population had become. When this index went in the opposite direction to the inflation indices than it would indicate that the CPI and RPI were giving a wrong impression.

    It also seems to me that as the banks have a vested interest in stopping the Bank of England raising interest rates (as can be seen reflected in the adverse movement in sterling today and yesterday) and as the banks have enormous political power as can be seen by the deliberate misrepresentation of inflation data to the public (see my first paragraph) then the inflation indices are simply not worth collecting.

    Also note that the Bank of England's (incompetent!) economists have been forced to admit that the way that the inflation data is collect deliberately underestimated the actual increased in the CPI and RPI for the whole of the last decade - they admit to 0.3% per year that to base any decisions on the MPC/FPC on these data is fundamentally wrong.

    These corrupt data allowed the Bank of England to set the wrong far too low interest rate fro at least the last decade (they have admitted this) and this caused the housing price inflation that gave rise to the banking crash and to the long term and unresolved far more damaging problem of over priced homes (still more than double sustainable levels) as part of the Nation's cost of production, as reflected in necessary wage levels.

    We must get a grip, despite the fact that the BBC does not always present the data properly!

  • Comment number 98.

    69. At 17:18pm 12th Apr 2011, John_from_Hendon wrote:

    "You mean to commit an act of bankruptcy - a composition with your creditors - that is what you are suggesting - a sensible choice fro those who will never be able to pay off their debts. That is I believe quite clearly the legal position of you 'suggestion'. This is inevitable and I am pleased that you understand this."

    -----------------------------------------------------------------------------------------------

    Clearly I didn't mean that John and I think you are being disingenuous here my friend!

    I mean that the various debts accrued in times of the recent asset bubble - domestic & commercial property etc - are now pretty much unpayable in the now foreseeable market conditions and that, since these debts are owed to banks who themselves are in an unsustainable debt position, there might be an arguement to do a restructuring deal across the board - not individual bankruptcy etc, as I suspect you already knew.

    I already know all the reasons and arguments for why some/most people would never agree but somebody is going to have to do something to reboot the current, broken state of affairs, otherwise it's going to stay broken and get a whole lot worse.

    And it really isn't about 'putting the interest rates up to control inflation' because that's just lazy thinking, short sighted and flawed! (BBC journalists please note...)



  • Comment number 99.

    A poorly researched piece of work. There is no evidence from the 'headline' year on year inflation figure that RPI inflation is reducing. The RPI index figure for February was 231.3 and based on the previous 12 months would be expected to be 232.2 in March - it was actually 232.5 (giving a year on year figure of 5.3%). The fact that 5.3% is lower than 5.5% (last month's annual figure) will just fool economists, not engineers. The CPI figure is marginally lower than expected but a drop from 4.3% to 4.2% (Feb index 117.8 to Mar index 118.3) would have indicated that inflation was unchanged from the trend of the last 12 months. The March index is actually 118.1.

    Don't get out the champagne too soon!

  • Comment number 100.

    "11. At 12:40pm 12th Apr 2011, Geoff Berry wrote:
    Is this the time for our 'big society' to 'be all in this together' and everyone suffer the introduction of a Prices, Incomes and Profits policy legislation?

    Other than 'cut and cut again' what are the governments economic and financial policies other than leave it to the free markets that got us into this unprecedented mess in the first place."

    ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

    Of course, and this is what many consumers are doing - and why not? The government's cry is cut cut cut, so why shouldn't consumers cut cut cut their spending and use the saving to pay off their deficits?

    It's all rubbish anyway. Inflation is still way above the target and the gov of the B of E should act now, not as, in his usual way, do nothing until it's too late.


 

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