I have seen the most extraordinary, verging on stupid, reactions this morning to the Office for National Statistics announcement that inflation increased from 3.9% to 4% in December.
Suggestions are being made that the war on inflation is being lost. Alternatively, we are in for a long, hard grind with high-interest rates. And, of course, wages must be kept down.
The reality is that none of these comments is true. These are the contribution by sector towards inflation at Christmas:
Food fell because supermarkets discount a lot of it at Christmas - it is a great time to buy cheap vegetables.
In contrast, there was profit taking on alcohol and tobacco, recreation and leisure, and clothing and footwear. All of these are related to just one thing: that this is the time of the year when retailers know most people cannot resist the social demand that people go out, and so they took a little profit where they could find it as a result. The consequence was a slight upward swing of almost no statistical significance in inflation.
Overall, this is the trend in inflation (there isn't a CPI chart, this CPIH one will do):
Inflation is falling.
It will continue to fall, overall.
When energy prices fall in April, that will become very apparent.
The actual risk is deflation, which China already has.
As Danny Blanchflower and I have long said, inflation always goes away. It has over 500 years. Nothing has changed this time. No war was needed. No interest rate rises were required. It just took a couple of years to work through the system. Everything else said about it is pretty close to nonsense.
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Inflation didn’t just increase, it ACCELERATED – according to various media sources.
Which is utterly bizarre
BBC Wales removed Carol Vorderman from her weekly radio show and in so doing allowed her to speak freely about anything. (she is now on LBC weekly)
She is someone to watch.
She is actively supporting the move for tactical voting. Her aim above all else is to get the Conservative party out of power.
But, despite her aptitude with numbers, she needs educating about economics as shown in her tweet today.
https://twitter.com/carolvorders/status/1747552539099177170
Can you get in touch with her Richard? She will have a lot of influence in the election and needs good guidance on this.
Well Carol is beginning to work for Byline Times as well, and …. Watch this space
Completely agree that the “panic headlines” about inflation rising are silly; the trend is down.
However, blaming Christmas is a bit of a stretch – it does come every year and these are Year-on-Year data. A slightly deeper dig is needed.
I see that alcohol and tobacco taxes are largely responsible…. but the issue (as always with YoY data) is what was the tax rise last year? Has there been any change in timing of tax rises? What is happening to the underlying, pre-tax price of these products?
One might expect the FT to examine these issues but I have yet to read anything.
On the issue of profiteering this might well be true – the aftermath of Covid and an inflationary “burst” does offer opportunity to gouge customers to a greater extent than last Christmas.
I think there was profiteering this year that there was my last
Retailers were more confident this year
There is talk, whether reliable or not in the mainstream media, that the interruption of shipping via Suez and the Red Sea will push up oil prices and general energy prices as a result of further Houthi attacks on commercial shipping due to US/UK bombing of Yemen in response to the Israeli genocidal war in Gaza. If this is the case inflation will rise again (temporarily)..
Very temporarily, with no reaction required
The coverage is, as a lot of news these days, trying to make a story about nothing.
CPI index in May 131.3; in Dec 132.2.
So CPI over the 7 months is 0.7%!! ( annualised 1.3%)
Interest rates should be dropping now and fast!
Agreed
It doesn’t stop Jeremy Hunt trying to spin this as a Conservative success, based in part on OBR Forecasts – which, as Hunt has to point out, to justify his argument – is actually wrong. The incoherent absurdity of the spin is so confused it is almost impossible to parse. This is all quite mad.
Meanwhile a Labour MP on BBC Radio 5 says Labour are going to rely on a “strengthened” OBR; there is an oxymoron. This must be based on their established record of poor OBR forecasting, which we see constantly (which for politicians is secure proof of the OBR’s profound wisdom). We are governed by fools.
Back in the real world serial car crash that is Britain today, The Met. Police commissioner has made this announcement on LBC that it is: “‘working with police forces across the country to pull together what will be a national investigation. [We] will pull together because there’s hundreds of postmasters and mistresses across the country. Fujitsu are based in one part of the country, the Post Office in another, [it’s a] massive piece of work’, Sir Mark told LBC. He added that there were ‘tens of millions of documents to be worked through in a criminal investigation’. But it will be much longer before any potential criminal convictions are brought about. Sir Mark told LBC he expected the investigation would not begin until 2026 at the earliest, as it will have to follow the public inquiry, which will deliver its verdict towards the end of next year.” (LBC).
Frame the context here; an investigation began in 2020. To date, “Two people have been interviewed under caution but nobody has been arrested since the investigation was launched in January 2020” (source, ITVx). If this ends with not a single person brought to account (and should someone brought to account be a low-grade scapegoat – then that must not ‘count’ as success); then the culpability for that, let us all be very clear – is Parliament itself; which will have completely failed the British people and deserves the utter contempt of all.
In addition, the Law has much to answer for here; it too has failed, because even if misled, the system of Law we rely on has not been sufficiently forensic in its investigation of the evidence, before prosecution and conviction. In Scotland prosecutions were not private, but undertaken by the Crown Office and Procurator Service. In that context, I am not comforted by the Lord Advocate’s new statement in Scotland.
If the Law, and not Holyrood or Westminster is not to correct the unsafe convictions, it would, I understand be a better solution for the Law to redress the failure than legislation (a bad precedent is set); but critically justice delayed is justice denied. And here, justice has already been denied. It is, I trust for the Lord Advocate also a first principle that it is fundamentally worse in Law, for an innocent victim to be convicted, than a guilty person goes free. In short, the two principles surely require the Law to take unprecedented action here to correct a heinous wrong that stains justice itself; and ensure that our Parliaments do not stray onto ground occupied rightly by the Law, because the politicians have to fill a moral and legal vacuum.
People have died with the outrage of convictions against them remaining outstanding, for crimes they did not commit (the CCRC has been reported to have made referrals to the Court of Appeal for deceased PO scandal cases). Heaven forfend that someone in Scotland should now die before the Lord Advocate manages to ensure the Law in Scotland corrects what may yet prove at least in part, its own failures.
Well said John Warren.
I mean, compare the treatment of Michelle Mone to any post office sub-master and then ask yourself if that is acceptable.
This is Thatcher’s lasting legacy – the expansion of the touchable rich.
Sorry – I mean to say ‘untouchable rich’.
The symbolic embodiment of the French Republic, and the iconic representative of “Liberté, Egalité, Fraternité”, is the noble female figure of Marianne.
Through the profound wisdom of the Conservatives, and the modern Scottish Conservative Unionists; they have selected for us a memorably iconic representative of modern, dynamic Scottish Conservatism in the 21st century: and thus Scotland has been lumbered with – Michelle Mone.
“Inflation is falling.It will continue to fall, overall. When energy prices fall in April, that will become very apparent.”
Well what the ONS actually said was…
Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.2% in the 12 months to December 2023, the same rate as in November”
So inflation isn’t falling it is rising…
CPIH inflation from May to December 2023 was 1.9% and CPI was 1.2%. I will publish my workinmg tomrrow.
To be polite, you are wrong.
Ahh so you agree the ONS data shows inflation is rising… but you are going to show us your own work to show that it is falling?… interesting
Their data shows it is falling…..