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Post by Yellow River on Dec 14, 2010 14:26:53 GMT
UK inflation rate rises to 3.3% in November
It followed record price rises for the October to November period in food, clothing and furniture, the Office for National Statistics (ONS) said.
The Retail Prices Index - which includes mortgage interest payments - rose to 4.7% from 4.5%.
One Bank of England interest rate policymaker said he expected CPI to hit 4% next year due to the VAT rise.
Andrew Sentence, a member of the Monetary Policy Committee, also told the BBC that it was time for interest rates to increase gradually to try to dampen inflation.
He is the only member to have voted for a rate rise recently and said a lack of movement on rates when price rises had been above target for a year could be "a risk to the Bank's credibility".
Commenting on the inflation figures, BNP Paribas economist Alan Clarke, said: "It's a disappointing number and it's only going to get worse in the next couple of months."
Some of the major energy companies have begun to raise energy bills, adding to the squeeze on household finances.
"Next month is utility bills, the month after that is VAT. It's all one-way traffic at the moment," he said
(extracts from a BBC report)
Not looking too good is it? In my view inflation for things we actually NEED like food, heating, clothes, shelter & transport is probably nearer 10%. How many of us will be getting a pay rise this year let alone one near 10%?
The inflation rate has remained above the 2% target by one percent or more for 12 months....& the Governer of the Bank of England - Mervyn King, still has a job!!
Let's face it even if interest rates go up by as little as say 1% there will be chaos in the housing market. House Prices are falling now even with historical low rates.
It's time to fasten your seatbelts 'cos it's going to one hell of a rough ride over the next couple of years
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Post by malcolmnl on Dec 14, 2010 14:58:25 GMT
Figures for inflation always include things you don't buy every day like computers, DVD players and televisions. When those things go down in price (which they often do) they drag inflation rates down and give artificial figures. There should be a seperate inflation rate for essentials only (food, housing, transport etc).
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Post by amarillo on Dec 14, 2010 15:26:42 GMT
It's time to fasten your seatbelts 'cos it's going to one hell of a rough ride over the next couple of years totally agree with that! |
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Post by Sheik Djibouti on Dec 14, 2010 15:35:13 GMT
So now would be a good time to fix your mortgage for 3 or more years?
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Post by Yellow River on Dec 14, 2010 15:59:40 GMT
Figures for inflation always include things you don't buy every day like computers, DVD players and televisions. When those things go down in price (which they often do) they drag inflation rates down and give artificial figures. There should be a seperate inflation rate for essentials only (food, housing, transport etc). Agree. With all the austerity measures who cares about the price of the latest i-pod etc? The price of everyday essentials is far more relevant. |
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Post by Yellow River on Dec 14, 2010 16:02:51 GMT
So now would be a good time to fix your mortgage for 3 or more years? Difficult one to advise on, but must surely be worth considering especially if you can get yourself a good rate/deal. |
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Post by Best Mate on Dec 14, 2010 16:25:35 GMT
I am on the Nationwide variable rate which is 2% above the base rate - so have been loving the last year (when my fixed deal ended).
It is a concern - but economics is not that simple (probably why the rest of the committee are voting to keep rates as they are and Andrew Sentence has been pushing for increases for the last 12 months).
You have chosen to ignore the fact that the governments have just announced the biggest round of spending cuts in history. Public server workers will have less money to spend as a lot of them will be out of work and I do not think the private sector is anywhere near the capacity to create the roles the governments hopes it will.
This will mean less spending and inflation will automatically fall. This is what I believe the other committee members fear.
As you are 100% right - the next two years are going to be very rocky. I think the committee feel an inflation hovering around 5% for a year is better then for example 3% inflation but interest rates hiked to 5% when there is very little spending in the economy anyhow (due to the future job losses and the knock on effect that has).
Not saying they are 100% right - but they have greater insight then us (to figures) and the media often do not portray things in a good light. It is all about the headline and they get quotes to just strengthen the angle they are creating rather then being objective.
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Post by Best Mate on Dec 14, 2010 16:39:26 GMT
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Post by Yellow River on Dec 14, 2010 16:59:34 GMT
I am on the Nationwide variable rate which is 2% above the base rate - so have been loving the last year (when my fixed deal ended). It is a concern - but economics is not that simple (probably why the rest of the committee are voting to keep rates as they are and Andrew Sentence has been pushing for increases for the last 12 months). You have chosen to ignore the fact that the governments have just announced the biggest round of spending cuts in history. Public server workers will have less money to spend as a lot of them will be out of work and I do not think the private sector is anywhere near the capacity to create the roles the governments hopes it will. This will mean less spending and inflation will automatically fall. This is what I believe the other committee members fear. As you are 100% right - the next two years are going to be very rocky. I think the committee feel an inflation hovering around 5% for a year is better then for example 3% inflation but interest rates hiked to 5% when there is very little spending in the economy anyhow (due to the future job losses and the knock on effect that has). Not saying they are 100% right - but they have greater insight then us (to figures) and the media often do not portray things in a good light. It is all about the headline and they get quotes to just strengthen the angle they are creating rather then being objective. You make some interesting and valid points Bestmate. My view is that the BofE policy is to inflate away the debt as much as they possibly can, anyone one with savings in Sterling will lose out big time & will affectively bail out those who are heavily in debt. You may be right in the end with inflation falling back as peoples spending power diminishes, however this will still be very bad for the economy and will stifle any serious growth. Can you have inflation in prices & deflation in spending?? I can't quite get my head around that one! I don't entirely agree with you about the media often portraying things in a bad light. I feel it is often the opposite, we're constantly fed stories about how busy the shops are in the run-up to Christmas, profits are booming etc. I simply don't believe it all. There's a lot of cr@p coming our way in the next couple of years and it appears to me that many people refuse believe that's the case, would rather stick their fingers in their ears and go la la la, let's get a pizza and watch x-factor. |
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Post by Sheik Djibouti on Dec 14, 2010 17:10:55 GMT
Quite . . . I was thinking of switching and fixing from my current deal as I'm paying over the odds on interest (about 5.75%) on my current fixed deal which has two years to run. I could switch products (with no fee) and fix for three years at 4.1%, which seems like a no-brainer really! Who knows where rates will be by 2013, but the evidence in that piecer suggests everyone expects them to be about where they are now (perhaps 0.25%- 0.5% higher). The money I save will go towards the increased cost of living in terms of fuel/energy/shopping/childcare  |
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Post by Best Mate on Dec 14, 2010 17:49:08 GMT
Good points yellow river.
Though yes - I think you can have inflation on-going and less spending happening at the same time. Especially when the inflation is led by raw materials such as food, power and petrol. Items which we need and hence will pay for whatever the price as they have an inelastic value. So if these factors are driving inflation higher yet people are spending less elsewhere on elastic goods (such as Sky TV, beer, clothing etc), other areas of the economy will contract downwards and there my friend is your double dip recession which i am pretty certain is going to hit us following the spending cuts announced. The question is, how badly.......
If you can switch and save Sheik - go for it. As all the above is theory - that will instantly save you cash (or take a year or two off your mortgage) - and if the shit did hit the fan, which is not impossible, and rates need to rise fast (surely the bank cannot QE again?) then you would be sat pretty for 3 years on your lower rate. I am surprised there are no costs involved to switch though.
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Post by Yellow River on Dec 15, 2010 17:16:01 GMT
More bad news announced today......
UK unemployment total increases to 2.5m
Unemployment in the UK increased by 35,000 in the three months to October to 2.5 million, the Office for National Statistics (ONS) has said.
It is the first time that the jobless measure has risen for six months.
The surprise increase was driven by public sector job losses, and pushed the unemployment rate up to 7.9%.
However, the number of people claiming Jobseeker's Allowance in November fell fractionally, by 1,200 to 1.46 million, the ONS said.
The rise in the number of jobless was almost entirely driven by the public sector, where employment fell 33,000, according to the ONS's latest monthly labour market report. However, the private sector failed to take up the additional slack, with employment remaining unchanged.
The government is relying on private sector job creation to offset an estimated 330,000 public sector redundancies over the next four years due to government austerity measures.
But David Birne, insolvency practitioner at accountants HW Fisher, describes this view as being out of touch with what is happening on the ground.
"For the UK's businesses and their employees, 2011 is shaping up to be harsher than any of the past three years," said Mr Birne.
Repossessions to rise say lenders
"This time next year we expect unemployment to be considerably higher than it is at present, as many more of Britain's companies go to the wall. We deal with companies of every size and from every sector day in, day out and for a large chunk of them things are looking very bleak indeed."
Analysts had expected total unemployment to fall, and the pound dropped over half a cent on the news, to $1.569.
The data could also heighten the policy dilemma for the Bank of England, coming only a day after figures showed consumer price inflation had risen to 3.3%, well above the Bank's 2% target.
In recent meetings, the Bank's monetary policy committee has been split three ways, with one member voting in favour of gradual interest rate rises to head off inflation, while another has voted to increase the Bank's purchases of government bonds in order to boost the recovery.
The unemployment figures do not bode well for 2011, according to Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD).
He found it especially disappointing that the positive momentum built up over the summer appears to have run out of steam before the full impact of government austerity has been felt.
While noting another slight fall in the number of people claiming Jobseeker's Allowance and a tiny increase in job vacancies, he said "the remainder of the ONS statistical release reads as if it was scripted by the Grinch who stole Christmas".
Pay - excluding bonuses - was up 2.2% on a year earlier, some way below the inflation rate, meaning that the purchasing power of wages continued to fall on average.
Another source of concern for many analysts is the growing inability of workers to find full-time jobs:
the number of people employed full-time fell 58,000, offset by a 26,000 increase in part-time workers
a record 1.16 million workers said they were working part-time because they could not find enough work
the number of temporary workers who could not find permanent jobs also hit a new high of 592,000
there was also a 22,000 increase in the number of people of employment age not seeking work - meaning they are not counted as unemployed - mainly due to an increase in early retirement.
"Until full-time jobs start to increase again the labour market will not be able to absorb large-scale job losses in the public sector," said Ian Brinkley, associate director of the Work Foundation. "Unemployment in 2011 must then inevitably rise."
(extracts from BBC article)
Pay is way below inflation as I suspected.
I'm a little surprised that these rises in the unemployment have been driven by Public Sector job losses.
I know a few people in the Public Sector who will also lose their jobs, but not at the moment, the real job cuts will be in April.
Dark days ahead.
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Post by peterdevo on Dec 16, 2010 12:33:28 GMT
Is this the return of stagflation? rising unemployment and inflation. I remember Heath..the worst premier in modern history coming up with a policy to increase wages by the same as inflation. This definitely would not work and would just stoke up inflation more
One of the main worries has to be the rising cost of fuel which affects everything transported. Not to mention what a prolonged cold spell of weather will do to the consumer in terms of rising gas and electricity...less money for other things..demand down and probably more jobs lost.
I may seem a prophet of doom and eventually the slump will end but it is going to one hell of a rocky ride on the way down
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Post by Best Mate on Dec 16, 2010 14:04:38 GMT
I agree.
I really think the government may want to relinquish some of the tax they put on fuel costs - to help ease the pressure.
As its a fixed percentage - they have been raking in far more then they should have as it has continued to increase (and as such, they have made more money out of their tax).
The answer isn't simple I am afraid. They reckon a further 600,000 jobs will go in the public sector and I will be shocked if half can get jobs in the private sector.
On the plus side - a lot of the baby boomers are coming to retirement age and I assuming people have smaller families then they did post 1945 so it may well mean more enforced redundancies. I have no figures to back that up - just a thought.
I feel really sorry for the university students leaving in 2011/2012 - we have two hard years ahead. They will invariably get jobs but the labour market will become so competitive that they will be on lower wages.
I read the government are starting a massive labour drive - will be interesting to see how that works. (Biggest labour drive in 70 years). In the past, they may have spent public money on public works to create jobs - but that won't happen in the current climate.
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Post by amarillo on Dec 16, 2010 14:32:43 GMT
I really think the government may want to relinquish some of the tax they put on fuel costs - to help ease the pressure. As its a fixed percentage - they have been raking in far more then they should have as it has continued to increase (and as such, they have made more money out of their tax). The biggest scandal is that the tax on fuel is not used to subsidise and improve public transport. I'm all for green taxes, but not if it is just a tax for the sake of it. |
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Post by Yellow River on Dec 17, 2010 16:21:11 GMT
More inflation busting rises......
Stamp prices will leap by up to three times the current rate of inflation in April.
Royal Mail announced today the price of first class stamps will rise by 5p to 46p and second class stamps will jump by 4p to 32p .
These rises, the largest since first-class postage began in 1968, represent an increase of 12.2% and 14.3%, respectively. Yet the Retail Prices Index inflation measure is currently at 4.7%.
The price of a first class large letter stamp is rising by 9p to 75p – a 13.6% rise.
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Post by Best Mate on Dec 18, 2010 19:14:37 GMT
More reason to email.....
On a serious note - for inflationery costs such as these, even if interest rates were to raise, these would not stop the postage rises as the Royal Mail I believe are in pretty big trouble as a business.
If they did raise interest rates, it would take money out of the economy - and in theory inflation would fall. But as I mentioned before, due to the natural resource rise in costs (fuel, food, and cotton prices) - it could lead to higher inflation and higher interest. Though of course, eventually, due to the higher rates, with less money in the economy - inflation would eventually recede.
As far as I can read (and I have done a bit of research since the topic was raised) - I think they will be staying put until the summer. However, I think I will look to get a fixed rate early next year. I can get a 4.69 rate (5 year deal) with the Nationwide. Just need to get the house revalued and then will look at doing it.
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Post by peterdevo on Dec 19, 2010 18:44:52 GMT
If they did raise interest rates, it would take money out of the economy - and in theory inflation would fall. But as I mentioned before, due to the natural resource rise in costs (fuel, food, and cotton prices) - it could lead to higher inflation and higher interest. Though of course, eventually, due to the higher rates, with less money in the economy - inflation would eventually recede.
I always thought that was the theory used years ago to control the rise in prices.
The problem is that every time fuel goes up this literally fuels price rises elsewhere due to transportation costs rising.
I don't agree with taxing the motorist purely to fund more pblic transport. Where I live public transport would not even get through. Subsidising public transport is not the best way forward. We will end up with the better off only being able to afford private transport. what we need is better communication.
I think inflation is going to rise and with it interest rates will go the same way, not just yet because we have to bear in mind there may well be an election coming up and the coalition do not want anything like that happening to upset the economy.
I feel the way forward may be to reduce commitment to green issues, reduce fuel duty and start a campaign to buy British to try and protect some of the jobs over here.
I do think taxes could be raised for the better off too, although in the bigger picture of things that could have a negative impact if it draws talent away from the UK
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Post by Best Mate on Dec 19, 2010 21:23:28 GMT
And the job losses (due to the cuts) I imagine will impact the amount of cash in the economy
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Post by peterdevo on Dec 20, 2010 18:01:36 GMT
I was reading today that interest rates will be on the way up soon..just as I expected.
The more we can get the mortgage down the better
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