Inflation

[dealtn]

The indices are falling because every month a high inflation month from a year ago is replaced by the most recent (low inflation) month. It is simple arithmetic, [...]

Again, the indices are not falling, it is the inflation rate which is falling. The indices are flat, which is what TJH was saying. [In fact Feb CPI was the highest figure ever at 132.3]

GS

Exactly. People need to be careful with what they are saying, and what acronyms they are using. It is far too common, even in the financial (and mainstream) media - let alone here - for people to get this wrong, and make incorrect or misleading claims.

[Nimrod103]

Any one with the other, correct, half a brain will know that's not true. Unless of course you are referring to the relevant indices, which aren't the same as the RPI/CPI. RPI and CPI have been far from static. They have been falling back towards their target.

Objection m'lud, "the CPI" and "the RPI" are considered to be the indexes around this place: CPI=Consumer Prices Index, RPI=Retail Prices Index. Usually when people mean the inflation rate they refer to inflation. [EDIT: @Nimrod103 being the obvious exception LOL. He also has experienced huge inflation, a 64,000-dollar question having become a billion-dollar question in just 70 years...]

Unless of course you are referring to the relevant indices, which aren't the same as the RPI/CPI.

If you say the RPI/CPI are not the same as the indexes then what do you consider them to be?


GS

I will admit that RPI and CPI as indices are normally quoted in the media and in various contracts as a year on year change in value expressed monthly. However, after having a quick Google and look at Wikipedia, this fact is not actually mentioned in any definition I could find. So to me RPI and CPI can be used as shorthand phrases to represent two different methods of calculating general inflation. While it would normally be quoted as the change over a year, there is value in also looking at and quoting the month on month figures as well.
I updated the common phrase to billion dollar question because that is magnitude of the mistake which the MPC is quite possibly about to make.

[Charlottesquare]

Objection m'lud, "the CPI" and "the RPI" are considered to be the indexes around this place: CPI=Consumer Prices Index, RPI=Retail Prices Index. Usually when people mean the inflation rate they refer to inflation. [EDIT: @Nimrod103 being the obvious exception LOL. He also has experienced huge inflation, a 64,000-dollar question having become a billion-dollar question in just 70 years...]



If you say the RPI/CPI are not the same as the indexes then what do you consider them to be?


GS

I will admit that RPI and CPI as indices are normally quoted in the media and in various contracts as a year on year change in value expressed monthly. However, after having a quick Google and look at Wikipedia, this fact is not actually mentioned in any definition I could find. So to me RPI and CPI can be used as shorthand phrases to represent two different methods of calculating general inflation. While it would normally be quoted as the change over a year, there is value in also looking at and quoting the month on month figures as well.
I updated the common phrase to billion dollar question because that is magnitude of the mistake which the MPC is quite possibly about to make.

Try the ONS, this link is to various CPI type indices and their methodology.

Afraid I just use the crude form of calc,

Index today minus -Index12 months back/divided by Index 12 months back,

but that is merely because that is how Indexation was calculated re CGT , no doubt statisticians are more sophisticated.

https://www.ons.gov.uk/economy/inflatio ... iandrpiqmi

https://www.ons.gov.uk/economy/inflatio ... bruary2024

As Feb 23 is 127.9 and Feb 24 132.3 that by my basic measure is (132.3-127.9)/127.9 =3.44%

As Mar 23 was 128.9 and April 23 130.4 and Feb 24 was 132.3 once we offload Mar 23 then as long as Apr 24 is not much higher than 132.3 we could be over the worst and sub 2%

[1nvest]

we could be over the worst and sub 2%

Don't give too much emphasis to just CPI/RPI that tends to be a lagging factor as its inclined to more broadly have a slower inflation rate than the likes of house and stock prices (typically driven by technological improvements such as one man and a machine doing the work of former armies of people).

Investing is no different to the cost-less daily lumping out and back in again every day. Consumer prices are just a very small proportion of that, mounts up over time, but where the volatility is diluted by (time) averaging. Relatively high at some points in time, low at others, washes out to the 'average'. We like to daily 'spend' our family wealth on house, stock, gold, i.e. in effect every day we buy back into that asset allocation. Additionally drawing/spending a 3.33% SWR on consumer goods/services and over 30 years that mounts up to total 100%, so for us a reasonable 'inflation' rate measure is a ... average(house, stock, gold, RPI) inflation rate. Where we hold (daily buy into) assets of ... house, stock, gold, that also sources a little daily rate spending on some CPI based items/services. Plot a real gain chart of that and its near a straight (0.999 r-squared) upward sloping line, +3.4% real log linear regression slope. Plotted instead against just RPI as the inflation rate and the slope increases to +5%, still reasonably straight, but a little more wobbly (0.978 r-squared).

Only if RPI/CPI goes into runaway, hyperinflation or persistent 10%+ is that a risk factor. Periodic blips are only to be expected (naturally occurring). Concerns on that front is that the UK is importing too many people in a era when technology is driving fewer people being needed, and in pursuing policies that drive away the likes of the 1% that pay a third of the tax take (leaving the rest having to pay 50% more in taxes to fill that hole). Yes for CPI the worst looks to be over, but that isn't the main risk, Parliament as ever is more a liability, will continue to pursue policies/set laws that are adverse for the UK .. whether that's Lab or Con who enter #10 later this year. Increasingly a banana republic - that sooner or later always hit a hyperinflation type event.

[GoSeigen]

This is a special British form of insanity:

https://www.theguardian.com/food/2024/a ... rters-warn

"Ministers’ decision to impose Brexit import checks on 30 April will lead to shortages of some foods, flowers and herbs, industry leaders have warned.

In the week after the government was accused of blindsiding the British food industry by giving 27 days’ notice that every consignment of items such as camembert, steak, tulips and chives would be subject to fees of up to £145, small retailers such as delis and farm shops have been scrambling to make sure they still have products to sell.

But they say some EU exporters have already decided that they have had enough of British red tape and are either pausing supply operations or have given up completely.
[...]
Since 2020, importers have had to deal with mounting levels of Brexit bureaucracy, including phytosanitary certificates, plant passports, import licences and export health certificates. Next month, they will have another form to fill out for animal products, plants and herbs and must pay a “common user charge” (CUC) of up to £145 per consignment."

Anyone who thinks inflation is going away is smoking actual crack!


GS

[Nimrod103]

This is a special British form of insanity:

https://www.theguardian.com/food/2024/a ... rters-warn

"Ministers’ decision to impose Brexit import checks on 30 April will lead to shortages of some foods, flowers and herbs, industry leaders have warned.

In the week after the government was accused of blindsiding the British food industry by giving 27 days’ notice that every consignment of items such as camembert, steak, tulips and chives would be subject to fees of up to £145, small retailers such as delis and farm shops have been scrambling to make sure they still have products to sell.

But they say some EU exporters have already decided that they have had enough of British red tape and are either pausing supply operations or have given up completely.
[...]
Since 2020, importers have had to deal with mounting levels of Brexit bureaucracy, including phytosanitary certificates, plant passports, import licences and export health certificates. Next month, they will have another form to fill out for animal products, plants and herbs and must pay a “common user charge” (CUC) of up to £145 per consignment."

Anyone who thinks inflation is going away is smoking actual crack!


GS

Yes, I'm sure that an increase in the price of Camambert (ghastly stuff), steak (how much comes from the EU?), tulips (plenty in my garden) and chives (ditto) will force up overall inflation figures significantly.

[scotview]

Iran eh ? And Saudi extending duration of production cuts.

Oil price is going to dictate inflation, everything else is just waffle.

[Tedx]

What if, they ask, all those interest-rate hikes the past two years are actually boosting the economy? In other words, maybe the economy isn’t booming despite higher rates but rather because of them.

.....This is, the contrarians argue, because the jump in benchmark rates from 0% to over 5% is providing Americans with a significant stream of income from their bond investments and savings accounts for the first time in two decades.

Einhorn notes that US households receive income on more than $13 trillion of short-term interest-bearing assets, almost triple the $5 trillion in consumer debt, excluding mortgages, that they have to pay interest on. At today’s rates, that translates to a net gain for households of some $400 billion a year, he estimates.

....All of a sudden, all of this disposable income accrues to these people,” he says. “And they’re spending it.”


https://www.bloomberg.com/news/articles ... all-street

[RockRabbit]

What if, they ask, all those interest-rate hikes the past two years are actually boosting the economy? In other words, maybe the economy isn’t booming despite higher rates but rather because of them.

.....This is, the contrarians argue, because the jump in benchmark rates from 0% to over 5% is providing Americans with a significant stream of income from their bond investments and savings accounts for the first time in two decades.

Einhorn notes that US households receive income on more than $13 trillion of short-term interest-bearing assets, almost triple the $5 trillion in consumer debt, excluding mortgages, that they have to pay interest on. At today’s rates, that translates to a net gain for households of some $400 billion a year, he estimates.

....All of a sudden, all of this disposable income accrues to these people,” he says. “And they’re spending it.”


https://www.bloomberg.com/news/articles ... all-street

This is simply more MMT nonsense which cherry picks selected income and payment streams (similar to the 'there is no inflation argument if you exclude shelter, food and transport'). By this logic if interest rates were increased to say 25% the economy would really start to motor along

[GoSeigen]

What if, they ask, all those interest-rate hikes the past two years are actually boosting the economy? In other words, maybe the economy isn’t booming despite higher rates but rather because of them.

Rather than keeping on posting articles about this stuff, how about articulating why you think the argument is a sound one and we can have an actual discussion about it?

To kick things off and practice what I preach I'll start by saying these people are putting the cart before the horse, getting cause and effect mixed up and trying to find evidence (cherry picking) for their confused ideas.

interest rates are rising because yields are rising because people are happy to pay more for goods than previously -- that's called "inflation"!!! Interest rates should rise because companies have pricing power. That's inflation. Some of us complained that interest rises were too little too late; at that time the article-posters were complaining about the ridiculously "high" interest rates and how the central banks were out to screw everyone, now they say raising interest rates is itself inflationary!

"maybe the economy isn’t booming despite higher rates but rather because of them" -- don't be an idiot. The economy is booming. That requires interest rates to be high, and it may require higher rates still. Yet look at rate expectations which is the crucial measure. Everyone thinks rates are going to fall. I'll say again what I've said before: rates are unlikely to fall significantly until everyone thinks they will continue up. That will be the moment when interest rate expectations can have an effect on spending and the booming economy. But as things stand, if the economy is strong and businesses have pricing power, yet consumers say real interest rates are going to be zero or negative in a year or so, then why wouldn't they be happy to spend and borrow?

That's the consumer/private sector but there is also the government to consider. Governments now have huge inflation-linked liabilities and the article-posters would do well to consider carefully the implications for that on consumer behaviour, prices and the banking sector.


GS
@No gilts holdings, long bank equity and real assets.

[Tedx]

It's just an opinion piece man. I'm not even sure it reflects my own opinion, but I found it interesting and thought others might too.

I do try and listen to all thoughts and opinions on across these boards but these can be hard to read sometimes.

Ach, you know what? I' think ill leave you all to it.

Ciao

[TUK020]

This is a special British form of insanity:

https://www.theguardian.com/food/2024/a ... rters-warn

"Ministers’ decision to impose Brexit import checks on 30 April will lead to shortages of some foods, flowers and herbs, industry leaders have warned.

In the week after the government was accused of blindsiding the British food industry by giving 27 days’ notice that every consignment of items such as camembert, steak, tulips and chives would be subject to fees of up to £145, small retailers such as delis and farm shops have been scrambling to make sure they still have products to sell.

But they say some EU exporters have already decided that they have had enough of British red tape and are either pausing supply operations or have given up completely.
[...]
Since 2020, importers have had to deal with mounting levels of Brexit bureaucracy, including phytosanitary certificates, plant passports, import licences and export health certificates. Next month, they will have another form to fill out for animal products, plants and herbs and must pay a “common user charge” (CUC) of up to £145 per consignment."

Anyone who thinks inflation is going away is smoking actual crack!


GS

Isn't that imported as well?

[1nvest]

This is a special British form of insanity:

https://www.theguardian.com/food/2024/a ... rters-warn

"Ministers’ decision to impose Brexit import checks on 30 April will lead to shortages of some foods, flowers and herbs, industry leaders have warned.

In the week after the government was accused of blindsiding the British food industry by giving 27 days’ notice that every consignment of items such as camembert, steak, tulips and chives would be subject to fees of up to £145, small retailers such as delis and farm shops have been scrambling to make sure they still have products to sell.

But they say some EU exporters have already decided that they have had enough of British red tape and are either pausing supply operations or have given up completely.
[...]
Since 2020, importers have had to deal with mounting levels of Brexit bureaucracy, including phytosanitary certificates, plant passports, import licences and export health certificates. Next month, they will have another form to fill out for animal products, plants and herbs and must pay a “common user charge” (CUC) of up to £145 per consignment."

Anyone who thinks inflation is going away is smoking actual crack!


GS

Isn't that imported as well?

Fine with me, don't care if crack, camembert, steak, tulips and chives prices inflate massively, wont affect my own personal inflation rate. Don't miss the nitrate overloaded tomatoes from Spain either, remained red and firm even a week+ later ... not natural (you are what you eat).

[Nimrod103]

Isn't that imported as well?

Fine with me, don't care if crack, camembert, steak, tulips and chives prices inflate massively, wont affect my own personal inflation rate. Don't miss the nitrate overloaded tomatoes from Spain either, remained red and firm even a week+ later ... not natural (you are what you eat).

Of course, every item on your list can be plentifully supplied indiginously. I have chives in my own garden, and Lincolnshire I think still grows tulips commercially. There is a British camembert (though why anyone wants to eat camembert I cannot imagine - ghastly stuff).