Turning points

[Boomer54]

19 hours ago, Linas.P said:

This is just monthly inflation figure, it is kind of flawed to compare last month YoY inflation drop against target of quarterly inflation halving.

As well it is easy to achieve lower inflation after already record inflation last year. That is why I think it would be more meaningful to wait until full year figure and compare full year 2022 vs. full year 2023.

It kind of becomes matter of perception - 4.6% inflation would be bad, but compared to 11.1% at the same period last year it looks almost like a good thing, but this inflation is compounding...

I know I am explaining basics here, but they are relevant when it comes to "real wage growth" and affordability. For somebody that was earning £40,000 last year their real wage continues to drop, slower than last year, but it is still dropping.

And besides this 4.6% is just headline figure averaged across many factors, food for example is still on 10.1% some areas even higher. So my view is that we are still far away from being out of this mess and I am not expecting deflation at any time soon, like for example fuel prices dropping maybe back down to at least ~£1.20 range which would have drastic effect on all good and everything. 

OK, let's get started ,but I am warning you I am out of here for Xmas. 😉

1."This is just monthly inflation figure, it is kind of flawed to compare last month YoY inflation drop against target of quarterly inflation halving."

Answer. Sunak at the start of 2023 pledged to half inflation by the end of 2023.

Discuss. Consumer price inflation, UK - Office for National Statistics

What we are seeing is a drop in month on month inflation rooted in domestic activity. Probably a good sign that the cost of financing driven by the BOE is now working. Qtrly isn't even mentioned. Y on Y is really unchanged due to the manner in which inflation is measured. What is indisputable is that inflation has halved from it's peak earlier this year so Sunak can claim his pledge has been met which is not the same has saying that he has had anything to do with it.

We can move on to the next point after you have addressed my response to your first para.

 

[Linas.P]

16 minutes ago, Boomer54 said:

OK, let's get started ,but I am warning you I am out of here for Xmas. 😉

1."This is just monthly inflation figure, it is kind of flawed to compare last month YoY inflation drop against target of quarterly inflation halving."

Answer. Sunak at the start of 2023 pledged to half inflation by the end of 2023.

Discuss. Consumer price inflation, UK - Office for National Statistics

What we are seeing is a drop in month on month inflation rooted in domestic activity. Probably a good sign that the cost of financing driven by the BOE is now working. Qtrly isn't even mentioned. Y on Y is really unchanged due to the manner in which inflation is measured. What is indisputable is that inflation has halved from it's peak earlier this year so Sunak can claim his pledge has been met which is not the same has saying that he has had anything to do with it.

We can move on to the next point after you have addressed my response to your first para.

 

1. Agreed, not sure why but I was under impression that when Sunak has made the pledge he made it against quarterly figure, but I can't find any evidence of that, so I might be wrong. If he is using just CPI then yes CPI went from 10.7% in November 2022, to 4.6% in November 2023 and yes he can claim the pledge despite not really doing anything about it.

2. That is why I want to look at annual inflation at the end of the year, because monthly inflation figures are kind of meaningless. One month it could be 15%, another 5%, but in the end of the year the annual inflation may be 5.8% and that means that £100 you hold in your drawer lost 5.8% of it's value. Whereas measuring monthly inflation really requires to divide it by 12 to get meaningful rate. I mean surely there is no issue to calculate what annualised rate is from monthly CPI figures, but why use monthly figures to begin with if what we actually want to know is annualised rate?! It is almost same as your point about savings account, yes it pay 8% monthly, but it is set-up in such way that your annual rate probably will be closer to 4% actually. 

[RONNIE W HODGEKINSON]

22 hours ago, stepheneric said:

The BOE is tasked with keeping interest around 2% - but they permitted it to go well into double figures - so to be bragging it  is now over double

the accepted rate is pathetic.

Moan over!!!!

 

Can,t Beat A Good Moan Stephen Or better still A Rant...!!!! lol

[GMB]

All I know is that things are getting dearer.  I could buy fish chips and peas for 1/6.  That's seven and a half new pence.

 

[Malc1]

43 minutes ago, GMB said:

All I know is that things are getting dearer.  I could buy fish chips and peas for 1/6.  That's seven and a half new pence.

 

and a pint of ale for 1/7 pence 

Malc 

[GMB]

Walker's bitter 1/8.

Tetleys mild 1/6

Me, I preferred the Walkers.

The only place to get a good old fashioned pint nowadays is Holts or John Willie Lees.

I don't know that much about darn Sarf but when I lived there in the late 60's we had Fullers and Youngs and even Courage directors. They are all still going and making a decent pint...

Some nice beer from Suffolk too. Adnams?

[Boomer54]

1 hour ago, Linas.P said:

1. Agreed, not sure why but I was under impression that when Sunak has made the pledge he made it against quarterly figure, but I can't find any evidence of that, so I might be wrong. If he is using just CPI then yes CPI went from 10.7% in November 2022, to 4.6% in November 2023 and yes he can claim the pledge despite not really doing anything about it.

2. That is why I want to look at annual inflation at the end of the year, because monthly inflation figures are kind of meaningless. One month it could be 15%, another 5%, but in the end of the year the annual inflation may be 5.8% and that means that £100 you hold in your drawer lost 5.8% of it's value. Whereas measuring monthly inflation really requires to divide it by 12 to get meaningful rate. I mean surely there is no issue to calculate what annualised rate is from monthly CPI figures, but why use monthly figures to begin with if what we actually want to know is annualised rate?! It is almost same as your point about savings account, yes it pay 8% monthly, but it is set-up in such way that your annual rate probably will be closer to 4% actually. 

Your last sentence is right on the money, but month on month inflation figures are the most useful for policy makers. The reason is they dictate what the trend is and allow them to react to that in a more timely fashion than an annual reading would permit. The operative word there is 'trend', because  when direction is established the most likely probability is that it will continue (and yes we know that at some point that will no longer be true). In effect, the BOE will act when they think the trend is established and in so doing they will hope to anticipate that they can change course before policy leads to the kind of outcome for which they would be criticised eg Recession.

As a postcript not directly related to your comments I have long held the view that the BOE is implicitly skewed to hold rates low too long and rates too high not long enough simply because of an innate bias that they do not wish to be criticised for starting a recession, but know they are unlikely to be criticised for creating too much growth through loose policy.

[Malc1]

What happens to old BofE Governors ?  

Malc 

[Linas.P]

14 minutes ago, Boomer54 said:

The operative word there is 'trend', because  when direction is established the most likely probability is that it will continue (and yes we know that at some point that will no longer be true).

Agreed...

As for trend to continue - in this case I can claim quite confidently that it won't...

You see inflation drop is mostly based on Housing and Household Services inflation drop, all other categories remained the same, some even increased a little. What is household services and why it has dropped... well turns out that it has dropped because it is calculated differently, usually inflation is calculated after you spent the money, household services are based on energy price cap, so as soon as cap drops, the inflation is calculated as dropping, even if you never paid as much as previous cap anyway. Now I am not saying that is not useful and it won't help, but there is another reason why I am saying we soon see increase in inflation again and that is OOH inflation, which will be impacted by mortgage payments, majority of people will come off fixed rate mortgages in next year and their payments will double, this already started this year and will accelerate next year. 

In short - you are correct that monthly inflation figures usually shows trend and that is why it is useful, but in this case I have feeling this trend will not stick and soon will be reversed. 

[Boomer54]

31 minutes ago, Linas.P said:

Agreed...

As for trend to continue - in this case I can claim quite confidently that it won't...

You see inflation drop is mostly based on Housing and Household Services inflation drop, all other categories remained the same, some even increased a little. What is household services and why it has dropped... well turns out that it has dropped because it is calculated differently, usually inflation is calculated after you spent the money, household services are based on energy price cap, so as soon as cap drops, the inflation is calculated as dropping, even if you never paid as much as previous cap anyway. Now I am not saying that is not useful and it won't help, but there is another reason why I am saying we soon see increase in inflation again and that is OOH inflation, which will be impacted by mortgage payments, majority of people will come off fixed rate mortgages in next year and their payments will double, this already started this year and will accelerate next year. 

In short - you are correct that monthly inflation figures usually shows trend and that is why it is useful, but in this case I have feeling this trend will not stick and soon will be reversed. 

The effect of remortgaging costs is a factor waiting in the wings although it has been in play for the last 12 months, but of course it largely depends upon when fixed mortgages are forecast to finish. However, all things being equal and the BOE showing the very bias I alluded to I can see they will be aware of this issue and it will be one more reason why they may choose to act sooner than previously expected.

I am done today, but I wlll move on to the next section of your first post tomorrow. Upon dissection I think we arrive closer to agreement on the first point than was apparent upon first posting.

[Linas.P]

6 minutes ago, Boomer54 said:

they may choose to act sooner than previously expected.

Hope it won't happen, but experience says they will do exactly as you said! 

[Spacewagon52]

2 hours ago, GMB said:

Some nice beer from Suffolk too. Adnams?

I LOVE Ghost Ship! But sadly it gives me terrible wind and rthe wife has banned me drinking it.

 

I am on the wagon for November but am stocking up with Abbot Ale!

[Malc1]

12 hours ago, Spacewagon52 said:

I LOVE Ghost Ship! But sadly it gives me terrible wind and rthe wife has banned me drinking it.

 

I am on the wagon for November but am stocking up with Abbot Ale!

No good will come of bringing the Church into this convo !   .....  it's Christmas approaching 

Malc