CPI inflation in the UK rises – apparently this is a big ‘surprise’
A quick look around at the headlines regarding today’s CPI rise to 2.6% shows just how poor the mainstream’s grasp of basic economics really is.
BBC:
How ANYone can be surprised that prices have risen considering the Bank of England’s penchant for printing money like its going out of style and, more importantly, when you consider that the Bank of England themselves are actively seeking higher than two percent inflation (see this and this).
So let’s make this really simple for those in the cheap seats – it is absolutely no surprise when you get rises in the CPI when you have a central bank actively seeking higher CPI inflation.
From today’s government funded ONS report:
- The Consumer Prices Index (CPI) annual inflation stands at 2.6 per cent in July 2012, up from 2.4 per cent in June
- The largest upward pressures on the change in the CPI rate came from transport (particularly air fares) and clothing & footwear
- The CPI stands at 122.5 in July 2012 based on 2005 = 100
- The Retail Prices Index (RPI) annual inflation stands at 3.2 per cent in July 2012, up from 2.8 per cent in June
- The largest upward pressures on the change in the RPI rate came from the purchase of cars, air fares, clothing & footwear and housing
- The RPI stands at 242.1 in July 2012 based on January 1987 = 100
Where did those rises come from:
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transport: prices, overall, rose by 1.0 per cent between June and July this year compared with a more modest rise of 0.6 per cent a year ago. This contributed 0.08 percentage points to the change in the CPI 12-month rate. The largest upward pressure came from air fares where prices, overall, rose by 21.7 per cent on last month (the biggest June to July increase since 2004) compared with 9.8 per cent a year ago. Flights to European destinations were the main contributor to this upward pressure. The purchase of second-hand cars was the other significant contributor, with prices falling more slowly than a year ago (1.0 per cent compared with 3.1 per cent). Partially offsetting these rises were downward pressures from petrol and diesel, maintenance & repairs, rail and sea transport.
clothing & footwear: prices, overall, fell by 2.6 per cent between June and July this year compared with a fall of 3.5 per cent a year ago. This contributed 0.05 per cent to the change in the CPI 12- month rate. This is the smallest fall in clothing prices between a June and July since the CPI was launched in 1996 and follows the record fall in prices between a May and June witnessed last month. The total fall in clothing prices from May to July 2012 is in line with the decreases seen between these two months in previous years.
There were no significant downward contributions to the change in the CPI 12-month rate between June and July 2012.
So all this means that we’re coming up on 3 years of total ‘fail’ by the BoE when it comes to hitting its legal requirement of 2% CPI inflation “at all times’.
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It also means that all that ‘extra’ inflation that the BoE has produced over the past three years – currently standing at 70% MORE inflation that the government charged them to produce – looks set to grow.
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To get back to that red line, which is the BoE’s LEGAL target rate in one month would require an annualized FALL in inflation of more than 40%. Or in other words all that extra inflation the BoE has produced will NEVER be given back, higher prices are here to stay and we expect to see CPI inflation rise back over 3% in the coming months.
Sterling briefly rose on the news – but quickly gave those gains back. The reason for the quick sell-off after a rise probably has something to do with this chart:
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If the BoE has no problem when printing at 5%, then printing at 2.6% is a doozy – and print they will.
Related posts:
- As the CPI falls for a third month the Bank of England has still produced 41% more price inflation than they should
- UK unemployment rises 80,000 – quantitative easing / money printing all but guaranteed
- OECD sees the UK officially back in recession – surprise surprise
- UK inflation rises to 0.6 month on month – that’s 7.2% annualised – gold price drops on the news
- CPI inflation back to 4.5% – 21 months of BoE ‘fail’
Link to this article: : http://www.goldmadesimplenews.com/analysis/cpi-inflation-in-the-uk-rises-apparently-this-is-a-big-surprise-7618/
Posted by Thomas Paterson on Aug 14 2012. Filed under Analysis.
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