As the Office for National Statistics has reported this morning with regard to inflation in September:
- The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 6.3% in the 12 months to September 2023, the same rate as in August.
- On a monthly basis, CPIH rose by 0.5% in September 2023, compared with a rise of 0.4% in September 2022.
- The Consumer Prices Index (CPI) rose by 6.7% in the 12 months to September 2023, the same rate as in August.
- On a monthly basis, CPI rose by 0.5% in September 2023, the same rate as in September 2022.
- The largest downward contributions to the monthly change in both CPIH and CPI annual rates came from food and non-alcoholic beverages, where prices fell on the month for the first time since September 2021, and furniture and household goods, where prices rose by less than a year ago.
- Rising prices for motor fuel made the largest upward contribution to the change in the annual rates.
- Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.9% in the 12 months to September 2023, the same rate as in August; the CPIH goods annual rate fell slightly from 6.3% to 6.2%, while the CPIH services annual rate rose from 6.1% to 6.3%.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.1% in the 12 months to September 2023, down from 6.2% in August; the CPI goods annual rate fell slightly from 6.3% to 6.2%, while the CPI services annual rate rose from 6.8% to 6.9%.
In summary, after inflation falling more than expected in August, it got stuck in September with some slight good news on core inflation.
The good news is inflation did not rise.
The bad news is that inflation does not move as predictably as the world would like: two small declines in August and September would have been better for PR than what we got.
The worse news is that the recession mongers at the Bank of England might see this, in combination with yesterday's news on wages, as a reason to increase interest rates again. Almost any excuse will do for them.
That possibility worries me.
It also worries me how little people understand inflation data. Last night I was on Times Radio discussing the wages data with Angela Knight, once upon a time a Tory Treasury minister. Her claim was that food prices are falling. She seems to think that a falling inflation rate means that. I assured her that she must do a very different food shop to most of us. It's true that some items have fallen, of course: that is what seasonality does. But overall that is not true. The reality is, I am quite sure, that she does not understand statistics.
She also completely rejected my suggestion that interest rate rises are fuelling inflation.
A little competence would help right now.
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It IS possible to have a discussion about whether higher rates are inflationary or deflationary…. they are clearly both and which dominates is not obvious, particularly given time lags and the changing nature of our economy and society.
It is NOT possible to have a debate about whether falling inflation means falling prices. Ignorance of basic statistics is shockingly common everywhere… even among those that should know better.
You have to give credit to the IEA and similar organisations for consistency. For two years they have stood to their guns that core inflation is due to an increase in the money supply. Print a lot of money and pay people not to produce goods and services and that bolus of extra money which has been devalued gets circulated and recirculated with more of it needed to buy reduced supplies of stuff.
When the facts have changed they haven’t budged an inch.
“…..which dominates is not obvious”.
No, and there is the real problem; and whatever the problems are, we know the source of their major causes. The Treasury doesn’t know the answer. the BoE doesn’t know; just as it has confessed in BoE QB, 1, 2022 that it doesn’t understand the consequences of QE. The problem is that ignorance doesn’t stop them both applying policies for which they know little about the consequences of their actions, persisting in executing bad errors, and peddling an ideology they clearly do not adequately understand. But there is the essential problem of both economics and bankers; both are operated by people who do not understand what they are doing; but it doesn’t stop them building a career out of it.
Was Knight not referring to the following, from the ONS bulletin?
“…food and non-alcoholic beverages, where prices fell on the month for the first time since September 2021”
Clearly a drop in a single month is hardly reason to break out the champagne (which I assume isn’t cheaper), but it seems her offence is one of (selective) specificity, rather than being entirely wrong.
The overall rate is still upward though
Politicians play on the ambiguity inherent in headline simplifications like ‘inflation down’ ; which doesn’t mean prices are down, but are rising less quickly than before. Politics has been reduced to a game of ‘word-spin’ (there is a board game called ‘Wordopoly’; this is the real thing). Cabinet ministers, including the PM spend less time making decisions, than spinning a line; and spend longer simply crafting the ‘killer’ ambiguous non-sequitur that looks like the Holy grail, but when deconstructed; means precisely nothing at all. That is the new political Holy Grail; not just the meaningless phrase that wins an election but means precisely nothing, but controls the language (Orwell’s great insight in ‘1984’. Takeover the world, by taking over the language).