Inflation

So much for Ed Miliband’s ‘cost of living crisis’. UK inflation, as measured by the CPI index, has just fallen to zero (pdf). Even this figure masks better news: food prices are actually falling, by 3.4 per cent over the last 12 months. The cost of motor fuel is down by 17 per cent, mainly thanks to collapsing oil prices. Crucially the price of such essentials should keep falling – as the below forecast from Citi (pdf) shows:- Now, should we worry about ‘deflation’? There are some economists who say this is a real problem because if things get cheaper than punters put off purchases. There is zero evidence of this happening in the UK. Indeed, according to Citi (pdf) …the opposite

The Office for National Statistics has updated its basket of goods that it uses to measure inflation, and has added some amusingly middle class items in, including sweet potatoes, liver and melons. Even better is the addition of ‘speciality beer/ale, bottled’ because of the ‘increase in expenditure and shelf space’ devoted to craft beer, and protein powder, a new item that ‘represents a distinct and growing sector not previously covered within the class’. Does this mean that Britain is becoming a nation of hipster gym bores who alternately boast about their interesting choice in bottled beer that has a kooky label (but that might still be a processed product rather than

Inflation fell to 0.3 per cent in January, the lowest level since records began in 1989. As the above chart shows, the government’s target of two per cent CPI inflation is now a long way off. The ONS has attributed the slow down to falling fuel and food prices — the latter is thanks to the on-going supermarket price wars. As Citibank’s Michael Saunders explains in his invaluable economics briefing (pdf), the weakness is concentrated in food, fuel and energy. Excluding energy, tobacco and alcohol, the year-on-year inflation level was 1.4 per cent, up from 1.3 per cent a year ago: Although inflation year-on-year has already sunk to a record low,

Deflation terrifies economists because once it starts, they have no idea what to do about it. When demand in an economy shrinks, companies cut jobs, and with fewer employed demand shrinks even more. The deflationary spiral is self-reinforcing. Central banks can cut interest rates to near zero and slosh money around like drunken lottery winners, but once hope flickers and dies, there is nothing they can do to persuade anyone to invest in the economy. Deflation took hold in Japan in the early 1990s and despite the government straining every sinew, its economy is still ailing 20 years on. Europe is right, then, to be in a panic. Inflation across

Home Checks began at British airports for passengers who might have come from west Africa with Ebola fever (even though there are no direct flights from the countries most affected). People who rang 111 with suspicious symptoms were to be asked whether they’d come from a high-risk country. Police arrested three men and three women from Portsmouth, Farnborough and Greenwich as part of an anti-terrorism operation. Of five men arrested the week before, two were released. The trial began before a jury at the Old Bailey of Erol Incedal on charges of preparing for acts of terrorism; parts of it will be held in secret. Ofsted said that ‘very little

Home Checks began at British airports for passengers who might have come from west Africa with Ebola fever (even though there are no direct flights from the countries most affected). People who rang 111 with suspicious symptoms were to be asked whether they’d come from a high-risk country. Police arrested three men and three women from Portsmouth, Farnborough and Greenwich as part of an anti-terrorism operation. Of five men arrested the week before, two were released. The trial began before a jury at the Old Bailey of Erol Incedal on charges of preparing for acts of terrorism; parts of it will be held in secret. Ofsted said that ‘very little

Tough at the top The clocks on Big Ben were cleaned by abseiling window-cleaners. Some other big cleaning/painting jobs: — Repainting the Forth Railway Bridge used to be a metaphor for never-ending work, but a new coating completed in 2012 is estimated to have a life of 25 years. — Sydney Harbour Bridge was, for the first 80 years of its life, cleaned by hand, but last year it was done for the first time by robot. — The world’s tallest building, the Burj Khalifa in Dubai, is cleaned by a team of abseilers, with all 24,000 windows taking three months to get through. — Most New York skyscrapers are

For the first time in 32 years, the overall pass rate for A-levels has dropped, and the percentage of those achieving an A* or A grade has also dipped slightly. One part of the country that has bucked the national trend is Newham. And in particular, the borough’s London Academy of Excellence – a brand new sixth form free school. Just under two years ago, this sixth form opened its doors to students in one of the most deprived boroughs in the country for the first time. Set up by a coalition of eight leading independent schools – including Eton, Highgate and Brighton College amongst their number – its goal was a straightforward

Home In a ministerial reshuffle, William Hague, who promised to leave Parliament at the election, was made Leader of the House, being replaced as Foreign Secretary by Philip Hammond, who was replaced as Defence Secretary by Michael Fallon. Sir George Young Bt, aged 73, was sacked as Chief Whip. Michael Gove was demoted to Chief Whip. David Cameron, the Prime Minister, said: ‘I wanted one of my big hitters, one of my real stars, one of my great brains, someone who has done extraordinary things for education in this country, to do that job.’ Mr Gove was replaced as Education Secretary by Nicky Morgan, who will keep her portfolio as minister

Wages in the private sector are now rising faster than inflation. The latest CPI inflation figures show that it now down to 1.6 per cent, comfortably below the Bank of England’s 2 per cent target. This is the sixth time in a row where inflation has fallen. An interest rate rise this side of the election is becoming ever more unlikely. Tomorrow, the Office for National Statistics provides it figures for average wage growth in the last three month. This is expected to show that wages are now increasing faster than prices, easing the cost of living squeeze. Labour argues that the cost of living crisis is about far more

Well, the great breadmaking debate hots up. David Cameron neatly sidestepped the heffalump trap that Nick Ferrari put in his path in an interview on LBC when he asked him the price of a Value Loaf in Tesco or Sainsbury. As you and I know, dear reader, Mr Cameron would no more eat that stuff than his own fingernails, and I for one applaud his good sense. If you can afford not to, don’t. But his elegant solution to the problem of not knowing that loaf-shaped carbohydrate costs 47p (he thought bread costs ‘north of a pound’, which is true of the kind he eats, only double that) was to

Labour had better get used to headlines of economic upgrades. There’s about two dozen major forecasters out there, and each will take a turn to say that Britain’s doing better than they’d thought. To have such good news repeated will be a headache for Labour, as Iain Martin blogs today. But Labour are right to latch on to the caveat: the GDP number are not much use to someone facing a decade of wage stagnation. Words can be deceptive in economics: if you read ten news stories from ten forecasters talking about upgrades, it doesn’t necessarily mean things are getting better. The Treasury recently released five-year forecasts from the people

Mark Carney made his mark this morning. Moments ago, he opened his inflation report and issued his ‘forward guidance’, which is designed to make the markets aware of his long-term plans for interest rates. This is important because, although there are signs of life in the British economy (and Carney was cautious about them), inflation remains above the Bank of England’s target, the base interest rate remains rooted to the floor and unemployment remains high at around 8 per cent. There is also the question of Britain’s mounting debts, the answer to which will largely depend on how the bond markets react to this and other announcements. And then there is