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Inflation rises – should the coalition be worried?

20 May 2014

Inflation has risen for the first time in ten months, with the consumer prices index growing by 1.8 per cent in the year to April 2014, up from 1.6 per cent in March.

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On the surface, this looks like bad news for the Coalition, which has boasted that falling inflation shows that Ed Miliband’s cost-of-living crisis is coming to an end. And certainly Labour has tried to capitalise on the rise already, with Shadow Treasury Minister Catherine McKinnell saying:

‘These figures underline why this Tory-led government is wrong to be so complacent about the cost-of-living crisis. Wages after inflation have fallen by an average of £1,600 a year since 2010 and the link between the wealth of the nation and family finances is broken. A huge turnaround is needed to ensure working people aren’t worse off than when David Cameron came to office.’

But it’s not quite that simple: the ONS figures say that the cost of food and non-alcoholic beverages fell by 0.5 per cent between March and April 2014 compared with a 0.7 per cent rise over the same period a year ago – the largest factor pulling inflation down. The biggest upward pushes were in transport and clothing and footwear. The cost-of-living crisis isn’t quite as focused on food as some Labour posters would have you believe.

But the response from the Treasury has been rather low-key so far, with just a spokesperson saying:

‘The latest figures show that inflation remains below the target rate and well below half of the peak in September 2011. Lower inflation and rising job numbers show that the government’s long term plan is working and Britain is coming back. The biggest risk to economic security would be abandoning the plan that is creating a brighter economic future.’

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  • CharlietheChump

    The real suprise is that with hundreds of billions of QE washing around inflation is not higher already and rising more quickly. (Assets, stock markets and housing notwithstanding)

  • Tony_E

    Economically, in a system where you are inputting large amounts of liquidity, you would expect to see some inflation. If that liquidity has been created by borrowing, then probably government would argue that a little inflation helps to keep the long term debt manageable.

    However, it’s just one quarter, with a few specific factors. If it turns into three or four steep quarters, then the government should do much more than worry, because they will have to stamp on demand to restrict it.

    And they don’t dare. Because that would prove that there really was no recovery, just a boost from loose money that had finally cleared personal debt hurdles. Same as the last time really (2009-10), and the time before that…(2001-2007), and the time before that (96-99). All loose money driven asset based growth spurts.

  • Mynydd

    When the last figures showed the inflation rate and wage rate were more or less equal we had Mr Cameron/Osborne/Clegg touring the television studios boasting Mr Miliband’s the cost-of-living crisis is over. So where are they today?.

    • the viceroy’s gin

      Well, from the looks of the Speccie kid’s blogpost, they’re hiding behind “the coalition”.

  • you_kid

    I like it.
    Millions have given up smoking. Because there is no price inflation.
    Millions have given up going to the bars and clubs on a Friday/Saturday. Because there is no price inflation.
    Millions have given up going on a summer holiday, any holiday in fact. Because there is no price inflation.
    Millions have enjoyed buying average homes at £275k a pop. When the kids now have a credit line 10 times their salary, who would care about price inflation?
    Millions have enjoyed watching Gerald Grosvenor raise the price of his asset portfolio by 20% since 2013. That’s growth, not inflation – we all love that, it’s sooo cool!
    Millions have enjoyed huge above inflation pension rises and rises of the minimum wage – they are now splashing the cash … ???

    • the viceroy’s gin

      Millions of oxygen molecules have been spent respirating a useless socialist lump like you… what a waste.

      • you_kid

        The resident troll excretes his foetid effluvium once again.
        Will he get hosed down before there is another hose pipe ban?

        • the viceroy’s gin

          How’s the goat and all the rest of your sockpuppets, lad?

    • Alexsandr

      what recession? I went to a food festival at the weekend. estimated footfall over 16000. Stalls old out half way through the afternoon. And all cash.

  • HD2

    Yes, but it won’t be.
    The ‘long-term economic plan’ to repay our National Debt is…


  • Alexsandr

    does anyone outside the westminster bubble care about such a minor statistical blip? Remember inflation is calculated from some notional ‘basket’ which probably doesnt reflect any reality. OK examine trends over months, but this is simply silly.

  • Hello

    Thank god. At least we’re not importing the Eurozone’s deflation.

  • HookesLaw

    After a period of steep fall then when that works out of the system it will reveal a rise. In this case a smaller fall works out as a statistical rise. We are of course charting fluctuations in the rate of a rise.

    But as the economy picks up then it will have an effect on inflation. So the rise in inflation indicates the truth about growth in the economy.

    • southerner

      Better to cut and paste directly from CCHQ press releases Hooky. It would still be sh!te of course but the trouble when you try and write it yourself is that it makes absolutely no sense whatsoever.

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