The Consequences of Brexit (part 3)

[apelike 10]

The larger-than-expected rise in inflation to 2.3% in February further closes the gap between the rise in prices and wage growth.

 

Inflation is now higher than wage growth (2.2% in the three months to January), signalling a return to falling real pay for UK workers.

 

I have posted before why small rises in inflation can be a boost to the economy but here is another snippet:

 

http://www.bbc.co.uk/news/business-30778491

[unbeliever 10]

And the fact that the British capita has to pay 20% more for the same <foodstuff, oil barrel, widget> compared to their EU counterpart, relative to 9 months ago, factors how in your maths?

 

Anyhow, looks from my last few shopping outings in the past couple of weeks that at least supermarket chain buyers have cottoned on and are adapting. The 'exotic' foodstuff and wine ranges are shrinking quite significantly. Can't remember the last time I saw a Vouvray in my local (large) Tesco, and their recent refit has shrunk the wine & beers section by -literally- half, with most of the offer now own-brand. Same story in Sainsbury's & Morrisons.

 

My culinary life ain't getting better after Brexit, for sure: gonna have to start asking my Mum to send food parcels soon

 

Yes, but so far the inflationary effect of this has been small. I'm not questioning the effect. I'm questioning the magnitude of it.

[Obelix 11]

Depends what's driving it. If it's things everybody depends on in similar quantities per capita, in the same internal market and customs union. I would expect strong correlation. In this case food and energy.

 

I've already demonstrated why this is not the case. You are building a classical strawman on a sandy foundation.

[unbeliever 10]

I've already demonstrated why this is not the case. You are building a classical strawman on a sandy foundation.

 

It doesn't seem to have been demonstrated at all. It has merely been stated emphatically multiple times. That's not the same thing.

Perhaps you can tell me what the approximate rate of inflation would have been if we had not left the EU?

[L00b 441]

Yes, but so far the inflationary effect of this has been small. I'm not questioning the effect. I'm questioning the magnitude of it.

It's only just starting. Told you before. Up to 5% by December 31, 2017 remains my prediction.

 

Same as the recessionary tendencies, which haven't started yet but which the BoE has been pro-actively mitigating in anger since June'16.

 

Same as the tax income shortfall, which hasn't started yet but which Hammond has started preparing for.

 

These things take a lot of time to come about, because of inherent latency and because governments, bodies and people try and manage/cushion them as best they can. But they can't be avoided entirely.

 

There hasn't been a proper catalyst yet. Since the referendum, basically there's been nothing concrete happening about Brexit. There's been a ton and a half of politcal testiculating, sure, but nothing more.

 

The Article 50 declaration is the catalyst. Because it can't be recalled, and so puts the UK's back against the 2 year wall with a WTO hard landing (...which I maintain is what May & her 3 Brexiteers are really after).

 

Popcorn is ready here, "let's go to war"

Edited March 21, 2017 by L00b

[unbeliever 10]

It's only just starting. Told you before.

 

Same as the recessionary tendencies, which haven't started yet but which the BoE has been pro-actively mitigating since June'16.

 

Same as the tax income shortfall, which hasn't started yet but which Hammond has started preparing for.

 

These things take a lot of time to come about, because governments, bodies and people try and manage/cushion them as best they can. But they can't be avoided entirely.

 

Then we are in agreement, are we not?

It would be a mistake to suggest that a substantial part of the current CPI inflation is down to Brexit.

All you are saying is that you are strongly of the view high inflation due to Brexit is coming.

Is that right?

[Obelix 11]

No it's up to you to disprove my assertion. It's not up to me to respond to your scattergun approach.

 

The assertion is that a 20% fall in sterling is inflationary especially with regard to fuel (priced in dollars) and food (priced partly in Euro). I further assert that this fall in sterling is due to Brexit and statements from the PM which can be shown comparing sterling prices verses the times of those events and utternaces.

 

Over to you.

[El Cid 220]

I have posted before why small rises in inflation can be a boost to the economy but here is another snippet:

 

http://www.bbc.co.uk/news/business-30778491

 

In 2016 wage growth was 2.5%, so all ok at moment, but if inflation outstrips wages its obviously a negative.

 

Up to date figures?

[apelike 10]

 

Same as the tax income shortfall, which hasn't started yet but which Hammond has started preparing for.

 

But as inflation rises so does the tax income coming from goods and services.

[unbeliever 10]

No it's up to you to disprove my assertion. It's not up to me to respond to your scattergun approach.

 

The assertion is that a 20% fall in sterling is inflationary especially with regard to fuel (priced in dollars) and food (priced partly in Euro). I further assert that this fall in sterling is due to Brexit and statements from the PM which can be shown comparing sterling prices verses the times of those events and utternaces.

 

Over to you.

 

So it's my job to disprove a claim presented with no evidence is it?

With you having dismissed already, without cause, the only meaningful evidence which might apply: which is that similar economies are experiencing similar inflation?

 

Apart from anything else, I have already agreed that devaluation is inflationary. I just say that the current inflation is primarily driven by other factors.

So what is it that you want me to argue with?

[apelike 10]

In 2016 wage growth was 2.5%, so all ok at moment, but if inflation outstrips wages its obviously a negative.

 

Up to date figures?

 

I don't think we can have up to dated figures just yet, but I was really pointing out that there can also be positives.

[L00b 441]

Then we are in agreement, are we not?

It would be a mistake to suggest that a substantial part of the current CPI inflation is down to Brexit.

All you are saying is that you are strongly of the view high inflation due to Brexit is coming.

Is that right?

No, I'm saying it's beginning to arrive.

 

You can only extend suppliers credit lines until they say 'no more until you pay up' and you can only absorb rising costs into your profit margin until your shareholders start looking at you funny. Eventually you have to pass a chunk of the 20%. Even if you massage your market offer to reduce FOREX exposure (like supermarkets seem to be doing by reducing their lines).

 

Looking at the timescales and the last 2 inflation statements, I'd say the UK is there now. 9 months after the referendum, I expect most long-term volume supply contracts (of the sort involving e.g. Unilever, as in the news a few months ago) have been or will shortly be renegotiated.

 

I expect the next inflation measure well north of this latest one, at which point we can start talking about a trend.

But as inflation rises so does the tax income coming from goods and services.

Only if you presume that a rising inflation has no adverse effect on consumption levels/volume. What say you? Edited March 21, 2017 by L00b