Guest Blogpost: Richard Lynch on Inflation

There was a further fall in inflation in February, the latest month for which figures are available, but prices are still rising faster than wages and than in competitor economies.

The figures for the year to end February 2012 (with end January figures in brackets) are as follows:

Retail Prices Index (RPI)                                                                –                              3.7% (3.9%)

RPI excluding mortgage interest (RPIX)  –                              3.8% (4.0%)

Consumer Prices Index (CPI)                                      –                              3.4% (3.6%)

The main downward pressure on the RPI came from price rises in motoring expenditure and fuel and light, while the main downward pressure on the CPI came from domestic electricity and gas, recreation, transport and electrical goods.

Nonetheless there were still upward pressures on both the main indices. For the RPI these included: alcohol and tobacco (6.1%), beef (11.6%), lamb (13.2%), pork (9.1%), butter (10.3%), coffee and beverages (13.7%), electricity (10.1%), gas (17.5%) and vehicle tax and insurance (10.9%). Upward pressure on the CPI included increased costs of fuels and lubricants (5.3%), education (5.1%), jewellery, clocks and watches (8.6%) and transport insurance (11.6%).

UK inflation, as measured by the CPI, is now only the seventh highest in the EU but is above the EU average of 3% and the Eurozone average of 2.7%. It is equal to the inflation rate in Italy but is higher than in France and Germany (2.5%), Spain (1.9%), Greece (1.7%) and Sweden (1%). The UK rate is also higher than that in China (3.2%), the US (2.9%), Switzerland (-1.2%) and Japan (0.5%).

Predictions are that inflation will fall further over coming months but these are likely to be affected by the current record high prices for oil, anticipated higher prices for food, and the increase in the price of postage stamps (by 14p to 60p for first class and by 14p to 50p for second class).

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.

Guest Blogpost from Richard Lynch: Sharp fall in January inflation

The latest Office for National Statistics figures show inflation falling sharply in January, as the effects of last year’s VAT increase fell out of the calculations. However, prices are still rising faster than wage increases and faster than in the large majority of competitor economies.

The figures for the year to end January 2012 (and end December 2011) are as follows:

Retail Prices Index (RPI)                                –                       3.9% (4.8%)

RPI excluding mortgage interest (RPIX)        –                       4.0% (5.0%)

Consumer Prices Index (CPI)                                    –                       3.6% (4.2%)

Much of the fall was due to technical reasons, mainly because current prices are now being compared with prices after the VAT increase from 17.5% to 20% last year, rather than prices prior to that increase. The increase in VAT is estimated to have added around 0.76% to inflation figures during 2011 and a fall in the figures was therefore expected when it was no longer a factor in the calculations.

However, there were also other downward pressures on inflation in January with the CPI, for example, affected by lower prices for clothing and footwear, furniture and household goods, due to the new year sales.

But there were upward pressures as well. In the case of the CPI, these included annual increases in the prices of alcoholic beverages and tobacco (6%), electricity (13.2%), gas (18.7%), tools and equipment for houses and gardens (16.8%), air transport (9.6%), jewellery, clocks and watches (8.4%) and transport insurance (15.5%). Upward pressures on the RPI came from increases in the price of biscuits and cakes (10%), beef (11.6%), lamb (16.2%), pork (11.7%), coffee and other hot drinks (15.2%), tobacco (8.8%), electricity (13.2%), gas (19.1%), vehicle tax and insurance (14.2%) and CDs (6.5%).

UK inflation is now no longer the highest in the EU but our 3.6% CPI is still higher than the CPI rate in the Euro Area (2.6%), in the EU as a whole (2.9%) and in 22 of the 27 member countries. These lower-inflation countries include Ireland (1.3%), Spain (2%), Greece (2.1%), Germany (2.3%), France (2.6%) and Italy (3.4%). It also compares badly to CPI rates in Japan (0.1%), Switzerland (-0.9%) and the US (2.9%).

Almost all economists are predicting that inflation will be lower in 2012 than in 2011, but there are mixed views on whether there will be sustained reductions during the year or whether prices will remain stubbornly high. The Bank of England is predicting significant falls by the end of the year, but they have made similar predictions over recent years and they have been consistently wrong. In addition, recent figures showing diesel prices at a record high of 143.7p a litre and petrol prices at a record high of 137.4 p a litre, suggest that there is more bad news to come.

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.

Guest Blog Post: Richard Lynch on UK inflation – now the highest in Europe

The most recent statistics have shown inflation falling slightly but most UK prices are still rising fast and our inflation is now the highest in Europe. The figures for the year to end October 2011 (with end September figures in brackets) show the following:

Retail Prices Index (RPI)-5.4% (5.6%)

RPI excluding mortgage interest (RPIX)-5.6% (5.7%)

Consumer Prices Index (CPI)-5.0% (5.2%)

The modest fall in all indices came largely from falls in the cost of food (due to “significant and widespread discounting by supermarkets” and good harvests for certain produce), air fares and petrol. However, there were also significant upward pressures from increases in the price of clothing, electricity and gas.

Amongst the factors keeping the CPI annual figure high were increases in the prices of fuels and lubricants (15.4%), gas (24.1%), electricity (14.9%) and bread/cereals (6.2%). Factors affecting the RPI included increases in the prices of fuel and light (20.2%), tobacco (13.4%) and motoring (7.7%).

All of this helped the UK continue its climb up the European inflation league and, after passing out Estonia, our CPI has now become the highest in the entire European Union.  Our 5% rate is head and shoulders above the EU average (3.4%) and the Eurozone average (3%). We are also well ahead of competitors like Italy (3.8%), Spain (3%), Germany (2.9%) and France (2.5%). We also have higher inflation than China (4.2%), the USA (3.5%), Japan (-0.2%) and Switzerland (-0.5%).

Who says the coalition is not capable of world-beating performances!

Update: November’s inflation figures have been published since the above article was written. They show the RPI down slightly at 5.2% and the CPI down to 4.8%.

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.

GUEST BLOG POST FROM RICHARD LYNCH ON INFLATION

Just how bad is UK inflation?

UK inflation is now at its highest level for over 20 years and prices are rising faster here than in almost all of our European neighbours and global competitors. The figures for the year to end September 2011 (with August figures in brackets) show the following increases, together with some frightening underlying increases:

Retail Prices Index (RPI) – 5.6% (5.2%)

RPI excluding mortgage interest (RPIX) – 5.7% (5.3%)

Consumer Prices Index (CPI) – 5.2% (4.5%)

The main reason for the rise in the RPI was an 18.8% increase in the cost of fuel and light, which included a 28.2% increase in the cost of domestic oil and other fuels, a 22.4% increase in the cost of gas and a 12.9% increase in the cost of electricity. Other reasons for the higher RPI included increases in the cost of tobacco (13.1%), clothing and footwear (11.1%), motoring expenditure (8.7%), fares (8.5%) and food (6.9%). Leisure costs, however, had a negative effect on the figures and cost of leisure goods actually fell by 2.4%.

The main reason for the rise in the CPI included increases in the cost of gas (13%), alcohol and tobacco (10%), transport (8.9%), electricity (7.5%) and food (6.4%).

The RPI is now at its highest point since June 1991, when John Major was Prime Minister, and it has been at or above 5% on ten occasions in the year and a half since the coalition took office. By way of comparison, it only reached or exceeded 5% on four occasions during the 13 years of the previous Labour government. The CPI is also abnormally high and its current level of 5.2% has never been exceeded since the index came into existence.

This CPI figure is also higher than comparable figures in Ireland (1.3%), France (2.4%), Germany (2.9%), Greece (2.9%), Spain (3%), the EU as a whole (3.3%) and Italy (3.9%). In fact only one EU country has higher CPI inflation than the UK – Estonia at 5.4%. The difference is even more extreme when we look at non-EU competitors, including Japan, which has zero inflation and the US, which has 0.3% inflation – 17 times lower than our figure!

And what we thought was the one bit of slightly good news, namely that state pensions and benefits would be going up by 5.2% (the September CPI figure) next April, is being questioned. George Osborne, the Minister for Misery, has now announced a review of the link with the September inflation figure and is considering a freeze or sub-inflation increases in these benefits instead!

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.