Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Why UK Inflation Will Increase in 2010

Economics / Inflation Apr 12, 2010 - 08:50 AM GMT

By: John_Cardy

Economics Best Financial Markets Analysis ArticleThe 'expert' economists tell us that Inflation is not a risk to the UK. They say it has risen but will decline again fairly quickly and everything is under control. But it's not. Ask real people running real businesses and they will tell you there a host of reasons why inflation will increase:


1. Sterling has declined. The pound is down against the dollar. The world is now truly global, and much of the world production is in the Far East priced in dollars. Even UK manufacturers often price in dollars now. When the pound goes down, then raw materials, finished goods and components become more expensive.

2. China has Inflation. The recession hit China, with reduced growth, but now things are booming there. Shortages of labour are common. Some factories closed. The remaining ones are struggling to keep up with demand.

3. Demand in the short-term is boosted by stock fill. The world reacted to the recession by reducing stocks. Now, as we grow again, we are all increasing production, but also increasing stocks. Demand for Far Eastern production is therefore amplified, and WILL mean price increases to manage demand. Cost prices are reportedly already increased by 25% on some Outdoor Toy large items this Spring, excluding the Shipping and Currency increase.

4. Shipping has increased. The theories that economists have in their models are based on history, they have missed the fact that we are so dependent on Far Eastern production, Shipping Costs have gone mad. They are now   higher than last summer, but only around double the summer of 2008. I do not expect shippers to increase capacity too fast; rather they will take some margin first.

5. Staff demands for Rises. Costs are up for real people. Living IS more expensive. Fuel, Council Tax, and shortly NI and other taxes to rise. Many companies responded to the recession with restrictions on pay. After nearly 2 years, the pressure to increase pay will be immense. And it will not be resisted. Prices WILL rise.

6. Petrol is up. Partly worldwide demand, partly sterling and partly tax, petrol is up, and is high and will get higher. It’s at near its previous peak, but the last time it was at £1.20 per litre, Sterling was at around $2, now with sterling at $1.50, if the price of a barrel gores up to near the previous peak of $140 then there is no option, Petrol will increase dramatically. This increases all kinds of costs, from deliveries, to power. And people will notice, driving the demand for higher wages.

7. Vat increases. An incredible number of retailers have absorbed all or part of the Vat increase from January. This has helped to keep inflation down so far, but has slimmed margins. It has effectively taken some of that economists slack out of the economy. Retailers will not be able to resist taking some increases soon.

8. It’s easy. Once in the habit, increasing prices is easy. Recently it’s been hard to increase. Customers question it all the time. When everyone is doing it, and justifying it, it becomes the norm. Have you seen the almost constant letters from suppliers already advising of abnormal pressures that mean prices 'have to go up'? Soon it will be normal. When it is, prices go up faster and more quickly. I remember in the 1980's when all of our profit came from the price increases. And that meant we did them twice a year. Don’t rule out multiple price increases.

9. Businesses are smarter. Government and BOE are surprised by how business has behaved in this recession. Business failures and staff cuts are much lower than expected. I am not surprised, business have got smarter. They have done innovative things like cut hours, rather than cut jobs, so they can keep skills. So, expect innovation on price increase. They will not be increases, they will be surcharges. So, your will have seen WEEE surcharge, The Credit Card Processing surcharge, the variable Fuel surcharge -  that goes up and down in theory, and as Government increases taxes, you will see them passed on as 'Tax surcharge'. We even had a supplier try a 'Working Time Directive Surcharge' because they had to give a rise to staff!

So, overall inflation is VERY real. The BOE believes it will be back below 2% in Q3. Nonsense. It will not happen. Wait and see. Today Producer prices and input prices are all up. We knew it would be. And for the reasons above, it will continue.

There is only one solution. Push up Interest Rates. Not to take money out of the economy, but to boost Sterling. Boosting Sterling will alleviate the imported pressure of many of the above, but would also have an impact on demand. It's Risky. It would increase costs for UK mortgage payers, but might put some money in to the pockets of people with savings. A tricky dilemma, I'm glad I am not faced with.

But, believe me, Inflation is here and strong, unless Sterling can recover. I think the Bank of England will be looking at todays figures and perhaps start believing too.

John Cardy is a Director of a UK based Outdoor Toy manufacturer, selling Trampoline Products and Climbing Frames.  He writes trampolineman.wordpress.com a blog about life running a small business in the UK. He believes that people running real business have a more instinctive and instant view on what is really happening day to day and a better grasp on what the issues are than expert economists and politicians.

© 2010 Copyright John Cardy - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules