Inflation

When David Cameron said this week that he is worried his children would not be able to afford to buy their own homes, he struck on one of the greatest economic problems of his premiership. The old British promise is that if you work hard and make the right decisions, you can advance in life and own your own home. This is the ladder that most aspire to climb. But for an entire generation, even the hope of home ownership is slipping out of view. A huge number of young Britons cannot hope to have the kind of life their parents enjoyed. The Prime Minister must know he is on dangerous

Britain stayed in deflation in October, with the Consumer Prices Index falling by 0.1 per cent over the year. So far this year inflation has averaged just 0.02 per cent – the longest run of low inflation since the 1930s. Citi says inflation is likely to turn positive again next month as the effects of last’s years oil price nosedive falls out of the 12-month change – but with sluggish global growth, the cost of goods falling and inflation in the cost of services running at just 2.2 per cent, it looks like low inflation will be with us for a long time. [datawrapper chart=”http://static.spectator.co.uk/y0IrQ/index.html”]

Inflation slumped back to zero in the year to August, down from a rise of 0.1 per cent in July, figures from the Office for National Statistics show, making seven months of little or no inflation. The costs of food, energy and imported goods have been falling, pulling inflation away from the two percent target. [datawrapper chart=”http://static.spectator.co.uk/XXn28/index.html”] Even stripping out some more volatile components—energy, food and tobacco—‘core’ inflation fell to one per cent, easing pressure on the Bank of England to raise interest rates. Tomorrow’s jobs figures are expected to show strong private sector pay growth, but jobs growth seems to be picking up in higher-pay and higher-productivity sectors, decreasing inflationary pressures as more

Home Andrew Burnham described calls from Yvette Cooper, a rival candidate for the Labour leadership, for him to withdraw from the contest as ‘quite strange’. The problem was how to prevent Jeremy Corbyn, a left-winger, from being elected by the alternative vote system by 610,000 party members and registered supporters. Gordon Brown, the former disastrous Labour prime minister, contributed by making a 50-minute speech in a small room at the Royal Festival Hall, during which he paced up and down continuously for an estimated 1 mile 1 furlong 5 chains and did not mention Mr Corbyn’s name. Kezia Dugdale, a Member of the Scottish Parliament, was elected leader of the

Home The government postponed a Commons vote on relaxing the Hunting Act in England and Wales after the Scottish National Party said it would oppose the changes. Scottish police admitted that a crashed car off the M9, reported to them on a Sunday, was not examined until the Wednesday, when one of the two passengers inside it was still alive. She died three days later. A case of H7N7 bird flu was found at a poultry farm near Preston, Lancashire, where 170,000 chickens were slaughtered. British people were being urged by the Foreign Office to leave Tunisia because ‘a further terrorist attack is highly likely’. Up to 5,000 were flown

Home Talha Asmal, aged 17, from Dewsbury, West Yorkshire, died in a suicide bomb attack on forces near an oil refinery near Baiji in Iraq, having assumed the name Abu Yusuf al-Britani. A man from High Wycombe, Buckinghamshire, Thomas Evans, 25, who had changed his name to Abdul Hakim, was killed in Kenya while fighting for al-Shabab. Three sisters from Bradford were thought to have travelled to Syria with their nine children after going on a pilgrimage to Saudi Arabia. Britain had had to move intelligence agents, the Sunday Times reported, because Russia and China had deciphered documents made public by Edward Snowden, the CIA employee who has taken refuge in

Reports of deflation’s death are exaggerated – sure, the CPI index has risen from -0.1pc in April to +0.1pc in May. But many important things are still getting cheaper: food, for example, costs 1.7pc less than this time last year. And the prices of larger-ticket items, the so-called ‘consumer durables,’ fell an average 2.6pc in May – the sharpest year-on-year drop since Labour’s 2009 emergency VAT cut. But as the above graph shows, Citi reckons (pdf) that inflation will not bounce back to where it was before. Sluggish pay and a strong pound mean we’re in for a relatively long period of stable prices. Its chief economist, Michael Saunders, sums it up thusly:- ‘A fairly

Home The annual rate of inflation turned negative in April, for the first time since 1960, with deflation of 0.1 per cent as measured by the Consumer Prices Index, so that a basket of goods and services that cost £100 in April 2014 would have cost £99.90 in April 2015. But, measured by the Retail Prices Index, inflation continued at a rate of 0.9 per cent. Marks & Spencer reported its first rise in annual profits for four years. Police trying to find the gang that broke into safe-deposit boxes in Hatton Garden last month arrested nine men. A botanist claimed unconvincingly that Shakespeare was depicted in the frontispiece of

Home Launching the Conservative party manifesto, David Cameron, the party leader, told voters he wanted to ‘turn the good news in our economy into a good life for you and your family’. The Tories promised: to eliminate the deficit by the end of the parliament; to provide 30 hours of free child care a week for working parents of three- and four-year-olds; to grant a right for housing association tenants to buy their properties; to increase the inheritance tax threshold for married couples from £650,000 to £1 million (paid for by nobbling tax allowances on pension contributions for those earning £150,000); to raise the threshold of the 40p rate to £50,000 by

So much for Ed Miliband’s ‘cost of living crisis’. UK inflation, as measured by the CPI index, has just fallen to zero (pdf). Even this figure masks better news: food prices are actually falling, by 3.4 per cent over the last 12 months. The cost of motor fuel is down by 17 per cent, mainly thanks to collapsing oil prices. Crucially the price of such essentials should keep falling – as the below forecast from Citi (pdf) shows:- Now, should we worry about ‘deflation’? There are some economists who say this is a real problem because if things get cheaper than punters put off purchases. There is zero evidence of this happening in the UK. Indeed, according to Citi (pdf) …the opposite

The Office for National Statistics has updated its basket of goods that it uses to measure inflation, and has added some amusingly middle class items in, including sweet potatoes, liver and melons. Even better is the addition of ‘speciality beer/ale, bottled’ because of the ‘increase in expenditure and shelf space’ devoted to craft beer, and protein powder, a new item that ‘represents a distinct and growing sector not previously covered within the class’. Does this mean that Britain is becoming a nation of hipster gym bores who alternately boast about their interesting choice in bottled beer that has a kooky label (but that might still be a processed product rather than

Inflation fell to 0.3 per cent in January, the lowest level since records began in 1989. As the above chart shows, the government’s target of two per cent CPI inflation is now a long way off. The ONS has attributed the slow down to falling fuel and food prices — the latter is thanks to the on-going supermarket price wars. As Citibank’s Michael Saunders explains in his invaluable economics briefing (pdf), the weakness is concentrated in food, fuel and energy. Excluding energy, tobacco and alcohol, the year-on-year inflation level was 1.4 per cent, up from 1.3 per cent a year ago: Although inflation year-on-year has already sunk to a record low,

Deflation terrifies economists because once it starts, they have no idea what to do about it. When demand in an economy shrinks, companies cut jobs, and with fewer employed demand shrinks even more. The deflationary spiral is self-reinforcing. Central banks can cut interest rates to near zero and slosh money around like drunken lottery winners, but once hope flickers and dies, there is nothing they can do to persuade anyone to invest in the economy. Deflation took hold in Japan in the early 1990s and despite the government straining every sinew, its economy is still ailing 20 years on. Europe is right, then, to be in a panic. Inflation across

Home Checks began at British airports for passengers who might have come from west Africa with Ebola fever (even though there are no direct flights from the countries most affected). People who rang 111 with suspicious symptoms were to be asked whether they’d come from a high-risk country. Police arrested three men and three women from Portsmouth, Farnborough and Greenwich as part of an anti-terrorism operation. Of five men arrested the week before, two were released. The trial began before a jury at the Old Bailey of Erol Incedal on charges of preparing for acts of terrorism; parts of it will be held in secret. Ofsted said that ‘very little

Home Checks began at British airports for passengers who might have come from west Africa with Ebola fever (even though there are no direct flights from the countries most affected). People who rang 111 with suspicious symptoms were to be asked whether they’d come from a high-risk country. Police arrested three men and three women from Portsmouth, Farnborough and Greenwich as part of an anti-terrorism operation. Of five men arrested the week before, two were released. The trial began before a jury at the Old Bailey of Erol Incedal on charges of preparing for acts of terrorism; parts of it will be held in secret. Ofsted said that ‘very little