As we advance on a raft of UK inflation data there has already been a reminder of one of the themes of this website which is that the UK is an “inflation nation” where the institutional bias is invariably one way. From the BBC.
Drivers saw their car insurance premiums rise by an average of £110 in the last year, a comparison site says.
More expensive repairs and recent government changes to injury payouts pushed up annual insurance costs by 16%, according to Confused.com.
It found drivers paid on average £781 on comparison sites for a comprehensive policy in the year to March 2017.
Average premiums are set to rise to a record high and could pass £1,000 next year, it added.
Up,up and away! I guess those pushing for driverless cars will be happy with this but few others. Some of this is that cars are more complex and thereby more expensive to repair but little or nothing was done about the rise in “whiplash” claims and there has been something of a stealth tax campaign.
IPT went up from 6% to 9.5% in 2015, to 10% in 2016, and will rise to 12% in June 2017. ( IPT = Insurance Premium Tax)
We get much of this from commodity prices and in particular the price of crude oil. If we start with crude oil it has returned to where it has mostly been for the last few months which is around US $55/6 for a barrel of Brent Crude Oil where the OPEC production cuts seem to be met by the shale oil producers. However today’s data will be based on March where the oil price was around US $5 lower so this is for next month.
Speaking of the price of oil and noting yesterday’s topic of a rigged price ( Libor) there was this on Twitter.
In 2 years oil price/bbl gyrated from $80->$147->$35->$80 while physical demand for consumption varied by less than 3%……..I recommended to Treasury Select Committee in July 2008 a transatlantic commission of inquiry into the completely manipulated Brent market…..I blew the whistle on LIBOR-type oil futures market manipulation in 2000 & lost everything I had. Treasury/FSA were complicit in a whitewash
I have speculated before about banks manipulating the oil price but how about the oil price rise exacerbating the initial credit crunch effect?
One area of interest to chocoholics in particular is cocoa prices as I pointed out last week. If we look at them in detail we see that London Cocoa has fallen from 2546 last July to 1579 with 2% of that fall coming this morning. How many chocolate producers have raised prices claiming increasing costs over the past few months? Even allowing for a lower UK Pound £ costs have plainly fallen here as we wait to see if Toblerone will give us a triangle back! Or will we discover that the road is rather one-way……
We get little of a signal from Dr. Copper who has been mostly stable but Iron Ore prices have moved downwards. From Bloomberg.
Iron ore dropped into bear-market territory, with Barclays analysts pinning the blame on lower demand from China……Ore with 62 percent content in Qingdao fell 1 percent to $74.71 a dry ton on Monday, according to Metal Bulletin Ltd., following a 6.8 percent drop on Friday.
So as we wait to see what the price of crude oil does next some of the other pressure for higher inflation has abated for now. This was picked up on the forward radar for the official UK data today.
Input prices for producers increased at a slower rate in the 12 months to March compared to the beginning of 2017………PPI input price increased by 17.9% in 12 months to March 2017, down from 19.4% in February, as prices remained fairly flat on the month and prices increased in the previous year.
There was also a slight fading of output price inflation.
Factory gate prices (output prices) rose 3.6% on the year to March 2017, from 3.7% in February 2017, which is the ninth consecutive period of annual price growth.
Our official statisticians point us to higher food prices which has been a broad trend.
In the 12 months to February 2017, vegetable prices in the EU 28 countries increased by 12.4% and in Germany they increased by 22.5%.
However whilst this was true this may well be fading a little as well. We had the issues with broccoli from Spain earlier this year but more recently I note there are cheaper prices for strawberries from er Spain. So whilst there was an impact from the lower Pound £ we wait to see the next move.
This is the new headline measure of inflation for the UK although those who remember the official attacks on the Retail Price Index for being “not a National Statistic” will wonder how a measure which isn’t one either got promoted?! Or why it was done with such a rush?
Some may wonder if this news was a factor? From the London Evening Standard a few days ago.
In London, where rents are by far the most expensive in the country, prospective tenants saw prices fall 4.2 per cent year on year………The average cost of renting a home in the UK remained almost the same as at the start of 2016, rising just 1.8 per cent, compared to the 3.9 per cent annual growth recorded a year ago, thanks to a significant increase in the number of properties available.
It does make you wonder if they thought the buy-to let rush of early 2016 might depress rents? Anyway even the official numbers published today are seeing a fading.
Private rental prices paid by tenants in Great Britain rose by 2.0% in the 12 months to March 2017; this is down from 2.1% in February 2017………London private rental prices grew by 1.6% in the 12 months to March 2017, which is 0.4 percentage points below the Great Britain 12-month growth rate.
If London leads like it usually does…
Oh and Scotland is seeing rent disinflation albeit only marginal.
Scotland saw rental prices decrease (negative 0.1%) in the 12 months to March 2017.
So we see that rents are currently a downwards pull on the annual inflation rate.
The all items CPIH annual rate is 2.3%, unchanged from last month.
Whereas if we look at house prices we see this.
Average house prices in the UK have increased by 5.8% in the year to February 2017 (up from 5.3% in the year to January 2017).
The weasel words here are “owner occupied housing costs” which give the impression that house prices will be used without actually saying it. For newer readers this inflation measure assumes the home is rented out when it isn’t and then estimates the rent and uses that.
Whilst the headline number is unchanged there is a lot going on under the surface. For example the apparent fading of rents means that the new promoted measure called CPIH seems likely to drop below its predecessor or CPI in 2017. However under the surface there are different effects in different groups. Take a look at this from Asda.
The strongest decrease in spending power has been felt by the poorest households, whose weekly discretionary income in February was 18% lower than in the same month before, falling from -£20 to -£23. This implies that the basket of essential products and services is even less affordable than previous year for the bottom income group.
The clue here is the term essential products and services which of course is pretty much what central bankers look away from as for them essential means non core. You could not make it up! But what we are seeing here is the impact of higher fuel and food prices on the poorest of our society. Those economists who call for higher inflation should be sent to explain to these people how it is benefiting them as we wonder if there will be another of these moments?
I cannot eat an I-Pad!
Meanwhile the UK establishment continues its project to obfuscate over housing costs. The whole area is an utter mess as I note that @resi_analyst ( Neal Hudson) has been pointing out inconsistencies in the official price series for new houses. Back months are being quietly revised sometimes substantially.
A challenge to our statisticians
With the modern GDP methodology we see that the explosion in Airbnb activity has had a consequence.
Colin (not his real name) contacted the BBC when he discovered the flat he rents out on Airbnb had been turned into a pop-up brothel.
You see the ladies concerned were no doubt determined to make sure the UK does not go into recession.
Looking at both their ads, some of the rates were about £1,300 a night. So if they were fully booked for the two nights that’s £2,600 each – £5,200 in total.
But as we mull the issue and wonder how our statisticians measure this? There is a link to today’s topic as the inflation numbers ignore this. Meanwhile if there was evidence of drug use as well would they be regarded as a modern version of Stakhanovite workers by the Bank of England? As Coldplay so aptly put it.
Confusion never stops