Coffee House Specdata

Inflation down, Osborne up

19 August 2014

12:08 PM

19 August 2014

12:08 PM

David Cameron is back on holidays again, this time to Cornwall. He missed a trick. His economic recovery is making the pound strong and, ergo, the continent cheap for British holidaymakers. This also makes imports cheaper which has, in turn, cut UK inflation to 1.6 per cent in July – down from 1.9 per cent in June. This will be deeply annoying for Ed Miliband, as it interferes with his ‘cost of living crisis’ narrative. This had more potency when inflation was high (see the graph above) but it becomes that much harder to push the line now. Especially when inflation is expected to trot along near the target of 2 per cent until the election.

Of course, the measure that most of us grew up with calling ‘inflation’ – the RPI index – is almost a full percentage point higher. But at 2.5 per cent even that is at the target set by the last government. Encouragingly, rail fares are linked to today’s RPI index so it has come down just in time.

[Alt-Text]


Michael Saunders at Citi expects CPI to average 1.7 per cent this year, but RPI to be higher at 3.3 per cent – his take here (pdf). If the Labour Party was functioning properly, it would today argue that inflation, on its own, doesn’t decide much: happiness or misery depends on whether the average wage is rising faster or slower than that inflation. If you adjust the official earnings by CPI and RPI, you see that it will be 2020 before the average salary is back to its pre-crash levels (below).

Screen Shot 2014-08-19 at 12.06.10

And if HM Treasury was functioning properly, it would counter that this doesn’t tell the full story. If you factor in the tax threshold increases, then disposable income looks better. Also, as Julian Harris pointed out in an excellent City AM piece, the new rules forcing employers to enrol staff into pensions will mean a greater chunk of their remuneration is being paid as pension, thereby depressing the earnings figures. As he put it:-

‘Analysis by the Treasury last year also suggested that total compensation – which includes all employee benefits, National Insurance contributions, and so on – has been rising at a much faster rate than just wages alone, helping to explain sluggish growth in regular pay.’

So, a complex picture with a simple upshot: the economy is recovering, there are jobs galore and the momentum is with Osborne and Cameron, rather than with Miliband and Balls.


More Spectator for less. Stay informed leading up to the EU referendum and in the aftermath. Subscribe and receive 15 issues delivered for just £15, with full web and app access. Join us.



Show comments
  • munch58

    What makes you laugh is that yesterday Miliband and his BBC mouthpiece claimed that rail fares would be rising by over 3% next year based on the latest inflation figures NOT on any decision made by the Government and went on about how unfair it all is for commuters and banged on about the “cost of living crisis” yet they both forgot to mention that they were actually using the formula for price rise in rail fares that was implemented by LABOUR ten years ago by Brown that was drawn up by him and his treasury team of Balls, Cooper and MILIBAND!!!!!!

  • CortUK

    Remind me what real wage inflation is? Interest on savings?

    Living hasn’t got any cheaper. It is just getting more expensive at a slightly slower rate.

    I’m a big fan Fraser, but why don’t you come back and crow when interest on savings accounts, and real wage inflation, rise above 2% again.

  • cambridgeelephant

    Incidentally I think you should pass this on to little Johnny Major. Apparently according to him – as of last week, again ! – it was only membership of the ERM that saved the day against inflation 20 years ago.

    So how come, as we haven’t been in the ERM since Wednesday September 16th 1992, it’s now as it is ?

    By little JM’s reckoning it should be double or triple digits. Do have a word !

  • ohforheavensake

    And Labour are still ahead in the polls: and the Tory vote hasn’t moved.

    • cambridgeelephant

      The latter must be imitating Labour’s policies of a sort. Because they haven’t moved or even shown up in four years.

  • Mike Barnes

    Interesting/desperate election tactic.

    “No your real pay has not fallen, because your pension contributions are going up. You’ll thank us in 40 years when/if you retire!”

    • Magnolia

      Not only are our pension contributions going up but our pensions are going down by the difference in RPI and CPI compounded over the retirement period for retiree and survivors. That looks to be quite a lot of take going forward from that graph.

  • Redrose82

    Our fastest growing economy is now matched by our fastest going athletes. What’s not to like. Wake up you kippers and smell the coffee.

    • Sapporo

      GDP per head is $2.4k below 2008.

      • Redrose82

        When did we change our currency to dollars?

        • Stephen Green

          It’s so Salmond can have the £ all to himself.

  • the viceroy’s gin

    What fantasy world are you living in, laddie?

    It is amusing the bilge you Speccie kids serve up for your bubble masters .

    Inflation is +3%, and wages continue to fall. No need to bother with your dashed line “projections”. They are no more accurate or useful than those you drew years ago, when you were delirious with joy over your Cameroonian heroes, and decided to invent some proof. We all know better than to listen to your deliriums, lad .

    Why don’t you tab up the massive debt you socialists have rung up, lad? That’s what’s bought all this stupendous economic splendor you imagine exists.

    So when does the bombing start in Iraq, lad?

    • Maurice_Gosfield

      Given your frequently expressed contempt for the views and abilities of the Spectator’s editorial staff, why do bother reading it, let alone posting?

      And why do you call everyone ‘lad’? You’re as much of a troll as Telemachus and moreover you come across as a closed-minded, patronising old berk.

      • the viceroy’s gin

        Goodness, you certainly seem obsessed with me and my posts, lad. Perhaps you should skip over them, and eschew trolling along behind them, as they appear to be upsetting you.

        • Maurice_Gosfield

          I wouldn’t say obsessed, berk. Just curious as to why anyone would expend so much time and energy on something that so obviously displeased them. I’d guess you have too much time on your hands and posting fulfils some deep need to be noticed and thought important or relevant. Like a latter day Victor Meldrew, only not as funny. Berk.

          • the viceroy’s gin

            I’d say you’re obsessed, lad. It doesn’t seem healthy for you either, particularly when you spend so much time obsessing over an anonymous internet poster, and fantasize about time and energy spent, and states of mind and so forth, and deep needs fulfilled and other such fantasies. It seems to have you worked up and quite upset.

            Plus, it makes you a troll, lad.

            • goatmince

              I wouldn’t have a clue what that is, a troll.
              Explain it to all of us not in the know.

              • the viceroy’s gin

                Your clue appears in whichever mirror you look into, troll… if you can find one big enough to reflect all of your army of sockpuppets .

  • artemis in france

    As he is the Editor of this fine magazine, I would ike to know how Frazer feels about Douglas Murray’s latest blog. It is time that all editors in Britain started screaming their fury at the rampant anti-semitism now manifest in Britain. Unless they take the lead the simpering and pathetic leaders of this country will continue to prétend it isn’t happening. Please, Frazer, show your true mettle and let’s have comment and an éditorial from you on this subject.

    • the viceroy’s gin

      …first let’s have the Nether article.

  • Roderick

    You’ve obviously touched the Labour nerve, Nelson. The usual suspects are out in full diversionary mode.

    • Smithersjones2013

      So pointing out that people are still suffering financially is a diversion is it? I look forward to Cameron and Osborne saying that during the campaign!

      PS You’ve obviously touched the Labour nerve

      Tory analysis is as sound as ever I see. Hint You rarely see Labour supporters complaining about immigration.

      • Roderick

        I meant the Kostalivinkrisis nerve, which runs from somewhere in the base of the brain to the mouth, without passing through the cerebral cortex.

        • Smithersjones2013

          So you’re one of those denier types are you? You know the ones whose entire thought process begins in their lower intestine and is immediately expelled in gaseous form from their rear end!

          • Roderick

            No, I leave that type of thinking to your flatulent leaders.

            • HookesLaw

              These intellectual cripples have had a rude awakening. Their fantasy world is being attacked by reality.

    • cambridgeelephant

      I’m no fan of Cameron/Osbourne but they are Einstein compared to Labour who haven’t come up with a single rational policy since 2008, when the economy went to ‘smash’ on their watch.

      From what I can see their policy is to 1/ Spend more : And/But 2/ Lower the defecit as well.

      The reality is Hollande pursued their policies – and France is a busted flush accordingly. The Eds won’t say that but that’s the truth.

      • the viceroy’s gin

        …and that’s the same policy the Camerluvvies have followed.

        • the viceroy’s gin

          …oh my, it seems our resident Camerluvvie apologist is having a seizure of some sort, and is being censored. I guess the socialists don’t like it up ’em.

      • Mynydd

        Please explain, if Labour didn’t have a rational policy, how come the recession that started in 2008 was ended by 2009 and in the second quarter of 2010 (election time) GDP growth was 1%

        • Inverted Meniscus

          Simple because you keep on trying to perpetuate the same lie. Brown poured borrowed money into the economy which surprise , surprise shows up as growth in GDP for a short period but is completely unsustainable. It is unsustainable because the cost of raising that money (interest) is higher than any return achieved by spending that money. It was spent not invested and didn’t do Brown any good because the public realised such GDP growth was unsustainable and he was kicked out. We still have Labour Trolls like yourself constantly repeating this ridiculous lie in the hope that it will become true or people are stupid enough to believe it. So no, Labour did not end that recession it merely tried to gerrymander some votes.

          • cambridgeelephant

            Indeed !

          • Mynydd

            The present government will borrow more in 5 years than the last Labour government did in 13 years. By your logic Mr Cameron/Osborne have poured borrowed money into the economy which surprise, surprise shows up as growth in GDP. So why should this governments borrowing be sustainable when Mr Brown’s wasn’t. Just look at the official figures by the ONS and you will see yearly increase in the National Debt, and that the recession officially ended before the last election.

            • Inverted Meniscus

              And another lie. The implication of your comment is that Borrowing would not have risen had Labour won in 2010 a ludicrous proposition. The economy was in tatters and unless the country was willing to undertake real austerity with huge cuts in public spending, certainly not on offer from Labour, then borrowing would inevitably rise. The economy had shrunk by 7.4% and Brown bequeathed a structural deficit of £168 billion. Without huge cuts in public expenditure, borrowing would rise whoever was in power. To imply that it has happened purely because the Coalition is in power is simply dishonest and the work of a Labour Troll.

              • Mynydd

                Mr Brown/Darling were committed to half the deficit in the life of one parliament, Mr Cameron/Osborne were committed to balance the books in one parliament, failure to do so means the structural deficit is still £100bn. What has happen since 2010 is the direct result of actions taken by the Coalition, after all they are in power, and if needed could have introduced huge cuts in public expenditure.

              • cambridgeelephant

                Well said IM !

                I’m not a C & O fan but that is absolutely true.

                Brown told the House of Commons he’d ‘abolished boom and bust’. That deserves to go down with Major’s ERM fiasco and Chamberlain’s ‘Peace in our Time’ as one of the most misplaced pieces of hubris in British political history.

              • AtMyDeskToday

                Congratulations. You managed a whole post, and an intelligent one at that, without resorting to the use of “lad(die) or other such like juvenile insults. Although at the last you spoiled the effect by the use of “Labour Troll”. Still, at this rate you could achieve relative normality in a few years. Keep up the good work.

                • Inverted Meniscus

                  Well thank you for the condescending bollux which, as I am doubtless far better educated than you are, gave me a good laugh.

                • AtMyDeskToday

                  Dear Perverted… commiserations on the relapse in your illness. I should also add that making delusional assumptions about other people is a further sign of problems… yours truly.

                • Inverted Meniscus

                  Please carry on it is always fun to hear from a pompous, deluded imbecile with a misguided superiority complex like yourself lad.

                • AtMyDeskToday

                  “Please carry on”

                  No, it would only fuel your anxiety and risk further damage to you.

                • Inverted Meniscus

                  Spoilsport. I do enjoy the faux superiority complexes of witless delusional idiots like yourself.

        • cambridgeelephant

          Because it didn’t and those figures were fiction and it’s only in the last 18 months that any kind of growth has returned. And even that’s pretty anaemic.

          • Mynydd

            The ONS don’t publish fictional figures, for example; GDP Q2/2010 = 1%, GDP Q2/2014 = 0.8% therefore the anaemic growth for Q2/2014 is less than the low growth of Q2/2010.

            • Inverted Meniscus

              If you increase borrowing then GDP will rise you idiot. It cost more to borrow the money however than the return achieved on that borrowing and so the growth was temporary, illusory and unsustainable. It is simply that a swine like Gordon Brown borrowed money to try and kid the electorate that growth had been restored. It hadn’t so stop lying.

              • Mynydd

                By your logic the return achieved on Mr Cameron/Osborne’s borrowing is only temporary, illusory, and unsustainable growth, because they have borrowed more than Mr Brown.

                • Inverted Meniscus

                  Stop trying to comment on matters of which you are ignorant.

                • Mynydd

                  As you don’t understand logic maybe you will understand the old saying; what sauce is for the goose is sauce for the gander.

                • Inverted Meniscus

                  Oh just stop being ignorant.

                • Mynydd

                  No answer to by logic then.

                • Inverted Meniscus

                  You are not logical you are an ignorant propagandist for the Labour Party who suggests that national debt would be lower if Labour were in power. A ludicrous proposition which defies all logic.

  • ZaraZelotes

    The pound is heading down, Fraser….

  • Sapporo

    GDP per head is $2,400 lower than 2008 and at 2004 levels.

    • HookesLaw

      There continues to be growth in real household disposable income. The ONS figures say that between 2008 and 2012 there has been a growth of 2.5%. We have had further growth since then.

      • Sapporo

        How is that measured? Absolute growth is up, as the MSM keep telling us, but growth per head is not. This suggests we have moved towards a cheap labour economy, at the same time as borrowing £120bn per year and £325m money printing. We have a huge balance of payments deficit. The previous quarter showed imports and exports were both down, so growth has to be domestically generated. By credit and debt. Our aggregate debt is one of the highest in the Western World.

      • Makroon

        You should have learned by now. Kippers think the artificial GDP high, manipulated by BrownBalls was perfectly legitimate, and the subtleties of Nelson’s blog-post are far, far, beyond their ken.
        Blame the “bloody immigrants”, it makes life easier to understand.

        • the viceroy’s gin

          …does your whining make life easier to understand, lad?

  • Smithersjones2013

    I see Frasers got his pom-poms out again. Yep its good that we have a strong currency. Oh wait a minute doesn’t it make exports more expensive and less competitive? That should start hitting the figures just before the election dontcha think?

    Not only that but Nelson also conveniently forgets that wages have been dragging behind inflation for a very long time and anything which further widens the gap between the cost of living and net earnings is just more pain! His shallow transparent spin doesn’t stand up. Pretending things are getting better for people when actually they are not is why the Tories will lose the election!

    Perhaps he could do an article on the public debt soon and tell us how well Osborne is doing on that?

    Nelson should find another source of income!

    • YahYah

      “Oh wait a minute doesn’t it make exports more expensive?”

      Only if the Sterling price remains the same, but there’s good reason to think that can be reduced if the prices of the components being imported to manufacture that good are falling. Init?

      • Smithersjones2013

        Lot of assumptions there. If pigs could fly I’d have shares in every company that sold reinforced umbrellas. But they don’t so I don’t.

        • Andy

          But you shouldn’t be encouraging politicans to debase the coinage.

  • anyfool

    I would rather have a shrinking economy than one fuelled by cheap immigrant labour, what is the point of having money to enjoy the fruits of your labour, when the country you want to enjoy it in, is turning into mass of shanty towns people by alien cultures that hate what you are or want.

  • Last Man Standing

    And of course hundreds of migrants and their children are being trained in murder in Syria and Iraq, and many thousands more Fifth Columnists wish they had the nerve to do the same, and there is no possibility that the British state will be able to prevent them returning and committing atrocities here in the UK.

    But inflation is down.

  • Last Man Standing

    Meanwhile another 10,000 migrants came to live in the UK this week. House prices driven by immigration continued to increase beyond the reach of young indigenous British citizens, who also continue to be squeezed by decreasing migrant wages. Hospitals, GPs and Dentists continue to drop indigenous British patients from their lists because of the pressure of migrant populations. And these same migrant populations continue to overwhelm social housing forcing indigenous British citizens to the back of the queue.

    But inflation is down.

    • phil davis

      Looks like Nick Griffin has a lot more free time on his hands nowadays.

      • Sapporo

        Insults…..that always shows maturity and intelligence.

    • Makroon

      People on here are fond of pointing out that the troll Telemachus likes to hang on the first post and divert the discussion.
      You Kippers do exactly the same thing with nearly every thread,
      Together, you have wrecked the site as a discussion forum – perhaps that was your purpose ?

      • the viceroy’s gin

        …perhaps you’re a whiny Camerloon, and can’t abide thought other than your own?

  • dalai guevara

    More good news for savers then.

    • the viceroy’s gin

      …how about goats?

    • Smithersjones2013

      So when did interest rates rise then?

Close
Can't find your Web ID? Click here