Wednesday, April 18, 2007

Inflation at 15 year high, as unemployment rises

On the BBC news bulletins I have heard they keep saying inflation is the highest in 10 years. That is of course wrong, and is based on the fact that it is the highest measured by CPI in 10 years because we have only been measuring inflation that way for 10 years.

If you look at the RPI figures, it is in fact the highest in nearly 16 years, in fact it is the highest since July 1991. So why is the BBC saying it is only the highest for 10 years? Why are they letting Ed Balls spout rubbish about inflation on the basis that it is only a 10 year high rather than a 15 year high?

What is of more concern is that inflation is going the wrong way and needs to be brought under control.

The problem is that means raising interest rates, whilst unemployment has just risen. An interest rate rise is not going to help that.

4 comments:

Bham Uni Cf said...

Couldn't agree more!!

Benedict White said...

Bham Uni Cf, many thanks!

loadofoldstodge said...

Evening Benedict. I rather think you're letting your anti-BBC bias and your desire to show the country heading over the abyss with Blair and Brown at the helm cloud your judgement.

Let's atart with an inflation rate of 3.1%. Let's be honest, Messrs Howe, Lawson, Major and Clarke would have been delighted with the perception of a 3.1% inflation rate as a "crisis".

We also know that fuel price increases and increases in milk and some foodstuffs are a factor. Further, we know that this time last year there was a vicious supermarket price war going on between Asda, Tesco and Sainsburys and consumers benefitted.

On top of all this, some retailers have taken the opportunity of prosperity to drive prices up safe in the knowledge that people are prepared to pay more for their luxury goods. Furniture has gone up 10% or so in the past year but sales remain strong.

I am far from convinced another interest rate rise is desirable but it will probably happen just as inflation starts to fall back to 2%. It may even be that interest rates will fall in the autumn and winter as the economy cools.

I think the next 3-6 months will be the most difficult for Brown this side of the next election as far as the economy is concerned. I think by 2009 the economic picture will be good and we even see scope for more tax cuts for suburban wage earners.

Benedict White said...

loadofoldstodge, Firstly, inflation is not 3.1%, in the measures used under the last Conservative government it is 4.8%.

If you follow the links in this article:
http://aconservatives.blogspot.com/2007/04/inflation-in-10-year-high-interest.html

like this one,
http://www.statistics.gov.uk/downloads/theme_economy/RP04.pdf

You will see that is the highest since July 1991. Almost 16 years ago. So I think it is either sloppy or lazy to describe it as the highest in 10 years. It is the highest in 10 years since that is when CPI figures started being collated. Highest since records began would be more accurate but equally misleading.

What is more it appears that inflationary pressures are still there.

Yes there are always reasons for inflation, what were January's?

Interest rates will rise next month, and it is very unlikely that CPI will be near 2%, it will be much closer to 3%. It may (and I hope it isn't) still be above 3%.