{"id":73797,"date":"2024-01-17T07:40:58","date_gmt":"2024-01-17T07:40:58","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=73797"},"modified":"2024-01-17T07:40:58","modified_gmt":"2024-01-17T07:40:58","slug":"inflation-always-goes-away-and-a-little-profiteering-at-our-expense-at-christmas-will-not-change-that","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2024\/01\/17\/inflation-always-goes-away-and-a-little-profiteering-at-our-expense-at-christmas-will-not-change-that\/","title":{"rendered":"Inflation always goes away, and a little profiteering at our expense at Christmas will not change that"},"content":{"rendered":"

I have seen the most extraordinary, verging on stupid, reactions this morning to the Office for National Statistics announcement <\/a>that inflation increased from 3.9% to 4% in December.<\/p>\n

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.<\/p>\n

The reality is that none of these comments is true. These are the contribution by sector towards inflation at Christmas:<\/p>\n

\"\"<\/p>\n

Food fell because supermarkets discount a lot of it at Christmas - it is a great time to buy cheap vegetables.<\/p>\n

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.<\/p>\n

Overall, this is the trend in inflation (there isn't a CPI chart, this CPIH one will do):<\/p>\n

\"\"<\/p>\n

Inflation is falling.<\/p>\n

It will continue to fall, overall.<\/p>\n

When energy prices fall in April, that will become very apparent.<\/p>\n

The actual risk is deflation, which China already has.<\/p>\n

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.<\/p>\n","protected":false},"excerpt":{"rendered":"

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
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