Tuesday, December 12, 2006
CPI inflation at record high
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

Consumer price inflation rose from 2.4% to 2.7%, retail price inflation from 3.7% to 3.9% and RPIX inflation (excluding mortgage interest payments) from 3.2% to 3.4%. All in all a poor set of figures, though aggressive discounting by retailers could see some of November's increases reversed in December. Interestingly, petrol prices contributed to higher inflation even though they fell, because they were falling more sharply a year ago. So did price rises for digital cameras and DVDs. Details here.

Comments

CPI INFLATION AT RECORD HIGH

Dear David,

Thanks for posting the artiicle, for people like myself with feet firmly planted terra firma the last couple of years have been rather confusing. Inflation figures reported seemed always somewhat out of keel with reality. I would like to add further that the persistent exclusion of mortgage repayments from these figures may be at best described as convienance accounting and at worst catastrophic. Mr Brown may well have miscalculated his economic cycle (he's moved the oalposts a few times) for the benefit of his own advancement. The benefits from his project to us as taxpaying citizens seem to evaporate as time goes on.
What will it be than? rates up? stagflation?
The bank of England may now have to look at these figures in the light of two recent rate increases and ask will more of the same medicine really make a difference.

Best wishes

Arik Schickendantz

Posted by: Arik schickendantz at December 12, 2006 02:32 PM

Dear David,

Regarding the petrol price component is not the recent uptick in the oil price a little worrying for inflation? You were forecasting $40 a barrel sometime next year do you still stand by thi?. Do the fundamentals of demand and suppy warrant it

Then we start looking at other commodity prices:
Wheat:
http://futures.tradingcharts.com/chart/CW/W
Oh dear, how about Corn:
http://futures.tradingcharts.com/chart/CN/M
Not do bad.
How about copper then?
http://futures.tradingcharts.com/hist_CP.html
Oh dear up about a third this year and more than doubled since the start of 2005.

The question I have is how long before these commodity price rises start appearing in the CPI? Also IF the CPI is rigged would it be better if people started holding Gold and silver as an infation hedge?

Also Saudi Arabia oil production seems down this year - do you think this is a voluntary cut or is this like US production in 1972 or the North sea in 2000. i.e. despite price rises we cannot pump any more oil, because it just isn't there?

Posted by: Alex A at December 15, 2006 09:04 PM