UK Inflation falls to 1.5%

paulschapmanpaulschapman Posts: 35,536
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http://www.bbc.co.uk/news/business-27884113
Lower fares for flights helped to push the rate of inflation down to its lowest level in four-and-a-half years in May.

The Consumer Prices Index fell to 1.5% in May compared with 1.8% in April, according to the Office for National Statistics.

It is the sixth consecutive month that inflation has been below the Bank of England's 2% target.

A fall in food prices also helped drive down the rate of inflation.

Comments

  • flagpoleflagpole Posts: 44,641
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    i wonder how this will affect the timing of interest rate rises.

    inflation is very low, but house price inflation is very high.
  • MartinPMartinP Posts: 31,358
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    flagpole wrote: »
    i wonder how this will affect the timing of interest rate rises.

    Yes this is a tricky one for the Bank to answer given the recent noise around interest rate rises.
    flagpole wrote: »
    inflation is very low, but house price inflation is very high.

    London Property Prices Falling

    It said that asking prices across England and Wales were at a "virtual standstill", rising by just 0.1% or £272 on the previous month to reach £272,275 on average. While London recorded a 0.5% monthly decrease in asking prices, Rightmove said they were still up by 14.5% compared with June 2013 to now stand at an average £589,776. The North West saw the sharpest month-on-month fall in asking prices, with a 1.8% slide.

    http://news.sky.com/story/1283215/london-property-prices-falling-says-rightmove

    Perhaps past their peak now.
  • andyknandykn Posts: 66,849
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    MartinP wrote: »
    Yes this is a tricky one for the Bank to answer given the recent noise around interest rate rises.



    London Property Prices Falling

    It said that asking prices across England and Wales were at a "virtual standstill", rising by just 0.1% or £272 on the previous month to reach £272,275 on average. While London recorded a 0.5% monthly decrease in asking prices, Rightmove said they were still up by 14.5% compared with June 2013 to now stand at an average £589,776. The North West saw the sharpest month-on-month fall in asking prices, with a 1.8% slide.

    http://news.sky.com/story/1283215/london-property-prices-falling-says-rightmove

    Perhaps past their peak now.

    Doesn't look like it:

    [ONS] UK house prices 'rise 9.9% in a year'

    "...In March, the ONS calculated that the annual rate of increase had fallen back slightly to 8%, so the April figures shows the market accelerating once again..."

    http://www.bbc.co.uk/news/business-27885185
  • flagpoleflagpole Posts: 44,641
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    andykn wrote: »
    Doesn't look like it:

    [ONS] UK house prices 'rise 9.9% in a year'

    "...In March, the ONS calculated that the annual rate of increase had fallen back slightly to 8%, so the April figures shows the market accelerating once again..."

    http://www.bbc.co.uk/news/business-27885185

    the problem that martin is pointing out is in addition to the market changing in the passed month or so the figure of 9.9% is meaningless.

    it's made up of ~15% in london and a couple of percent in the rest of the country.
  • flagpoleflagpole Posts: 44,641
    Forum Member
    MartinP wrote: »
    Yes this is a tricky one for the Bank to answer given the recent noise around interest rate rises.



    London Property Prices Falling

    It said that asking prices across England and Wales were at a "virtual standstill", rising by just 0.1% or £272 on the previous month to reach £272,275 on average. While London recorded a 0.5% monthly decrease in asking prices, Rightmove said they were still up by 14.5% compared with June 2013 to now stand at an average £589,776. The North West saw the sharpest month-on-month fall in asking prices, with a 1.8% slide.

    http://news.sky.com/story/1283215/london-property-prices-falling-says-rightmove

    Perhaps past their peak now.
    i honestly don't see it.

    the population of london is rising far faster than we are building property spaces for people to live in. until that changes the long term trend in prices is up. the only question is how much. IMHO
  • paulschapmanpaulschapman Posts: 35,536
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    flagpole wrote: »
    i wonder how this will affect the timing of interest rate rises.

    inflation is very low, but house price inflation is very high.

    Finely balanced - house price inflation is not even over the whole country, maybe the better option is increasing house building in the South-East where house price inflation is highest.

    On the other hand there are thoughts that house price inflation is now slowing down (as it is now getting increasingly difficult for new buyers to enter the market).
  • andyknandykn Posts: 66,849
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    flagpole wrote: »
    the problem that martin is pointing out is in addition to the market changing in the passed month or so the figure of 9.9% is meaningless.

    it's made up of ~15% in london and a couple of percent in the rest of the country.

    "But excluding London and the South East of England, the cost of a home was still 6.3% higher than 12 months before."
  • jmclaughjmclaugh Posts: 63,988
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    andykn wrote: »
    "But excluding London and the South East of England, the cost of a home was still 6.3% higher than 12 months before."

    They could do with revamping CPIH which supposedly includes housing costs but not as we know them as that fell from 1.6% to 1.4%.

    It is however good news that inflation remains below 2%.
  • GreatGodPanGreatGodPan Posts: 53,186
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    Interesting that the RPI, which was the measure of inflation used for pensions and many benefit increases when this government came in is 2.4%.
  • paulschapmanpaulschapman Posts: 35,536
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    Interesting that the RPI, which was the measure of inflation used for pensions and many benefit increases when this government came in is 2.4%.

    Pensions would rise by 2.5% under the coalition triple-lock guarantee which the conservatives have already indicated will be kept post election the state pension will rise every year in line with wages, prices or by 2.5 per cent - whichever is highest
  • GreatGodPanGreatGodPan Posts: 53,186
    Forum Member
    Pensions would rise by 2.5% under the coalition triple-lock guarantee which the conservatives have already indicated will be kept post election the state pension will rise every year in line with wages, prices or by 2.5 per cent - whichever is highest

    It is only the state pension that is subject to the triple lock - and with RPI rates being consistently higher than 2.5% (and of course wages) in the past pensioners would be getting a much higher yearly increase, let alone recipients of benefits.
  • jcafcwjcafcw Posts: 11,282
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    I saw a news report last week. I think it was ITV. It was about George Osborne going to Norway who have clamped down on mortgage lending which has lowered the average house price.

    So how low is too low for inflation? What would be the lowest limit we would like? Can we raise interest rates whilst it is still falling?
  • [Deleted User][Deleted User] Posts: 14,922
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    MartinP wrote: »
    Yes this is a tricky one for the Bank to answer given the recent noise around interest rate rises.



    London Property Prices Falling

    It said that asking prices across England and Wales were at a "virtual standstill", rising by just 0.1% or £272 on the previous month to reach £272,275 on average. While London recorded a 0.5% monthly decrease in asking prices, Rightmove said they were still up by 14.5% compared with June 2013 to now stand at an average £589,776. The North West saw the sharpest month-on-month fall in asking prices, with a 1.8% slide.

    http://news.sky.com/story/1283215/london-property-prices-falling-says-rightmove

    Perhaps past their peak now.

    London's Whopping 18.7% Home Price Surge Means UK's Housing Bubble Slams China's

    A month ago, using the latest UK housing data from Rightmove, we asked a simple question: whose housing bubble is bigger: China's, or the place where increasingly more of China's $25 trillion in bank assets are being parked: the UK (specifically London). Using then available data, the answer was still a toss-up, even if the divergence in directions was quite clear. Earlier today, we finally got the official data from the UK's Office for National Statistics, and we politely retract our question, as rhetorical as it may have been. The reason: there is no contest - the UK's housing bubble has officially slammed China's, and the result is nothing short of a knock out.

    http://www.zerohedge.com/news/2014-06-17/londons-whopping-187-home-price-surge-means-uks-housing-bubble-slams-chinas

    As for the drop in the carefully constructed headline inflation figure, to be expected. as others have pointed out, other measures including essentials are higher.

    Alternate Inflation Charts


    http://www.shadowstats.com/alternate_data/inflation-charts

    Similar observations in America where real life doesn't relate to official figures.
  • northantsgirlnorthantsgirl Posts: 4,663
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    Is 1.5% good then, after all its only 0.5% in the eurozone?
  • jcafcwjcafcw Posts: 11,282
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    Is 1.5% good then, after all its only 0.5% in the eurozone?

    0.5% is bad. It is starting to get too low and that cause problems in the future.
  • BrokenArrowBrokenArrow Posts: 21,665
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    flagpole wrote: »
    i wonder how this will affect the timing of interest rate rises.

    inflation is very low, but house price inflation is very high.

    The government have changed the rules in April, only those with a triple A 999 credit score will now get a mortgage.

    I know someone who fell foul of this and they already had a house, sold it to move to a bigger house and then the mortgage was refused, so now they are homeless. Bad luck it changed in the week they were moving.

    We are back to the situation where there will be no first time buyers, so the whole housing market will stall.

    Nevana for buy-to-let buyers.
  • SirMickTravisSirMickTravis Posts: 2,607
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    jmclaugh wrote: »
    They could do with revamping CPIH which supposedly includes housing costs but not as we know them as that fell from 1.6% to 1.4%.

    It is however good news that inflation remains below 2%.

    Actually I think the Bank should be targeting inflation at more like 3%. The obsession with ultra low inflation is one of the worst government policies of the last 40 years. The Bank should be targeting nominal GDP growth of around 5% IMO.
  • taurus_67taurus_67 Posts: 6,930
    Forum Member
    With gas prices already on the increase due to the Ukraine situation and a possible, maybe prolonged, spike in oil prices because of an impending Iraqi civil war, is this as low as the inflation figure is likely to be, and we're likely to see a gradual increase over the summer?
  • rusty123rusty123 Posts: 22,872
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    taurus_67 wrote: »
    With gas prices already on the increase due to the Ukraine situation and a possible, maybe prolonged, spike in oil prices because of an impending Iraqi civil war, is this as low as the inflation figure is likely to be, and we're likely to see a gradual increase over the summer?

    I thought the wholsale gas and oil price has fallen by something like 30% over the past 12 months hence why the big 6 were getting criticised for not passing the savings onto consumers. If things in Iraq cause a spike it might only return to a level we're already paying for.

    Had the big 6 passed those savings on i'm wondering what the inflation figures would have looked like.
  • [Deleted User][Deleted User] Posts: 14,922
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    rusty123 wrote: »
    I thought the wholsale gas and oil price has fallen by something like 30% over the past 12 months hence why the big 6 were getting criticised for not passing the savings onto consumers. If things in Iraq cause a spike it might only return to a level we're already paying for.

    Had the big 6 passed those savings on i'm wondering what the inflation figures would have looked like.

    UK Wholesale Gas Prices Rise After Ukraine Gas Halt By Kremlin

    Well that didn't take long. Home prices are not the only thing surging in Britain as Reuters reports British spot wholesale gas prices climbed over 7% after Ukraine and Russia failed to agree on the price of future gas deliveries. Britain gets around 5% of its gas from Russian sources and a mild winter and spring have prompted utilities to inject more gas into storage than usual. One analyst notes "as yet flows through Ukraine to Europe have not been disrupted but the market has become increasingly concerned that they will," and now, following the explosion in the largest gas transit pipeline in Europe, disruptions have begun.

    http://www.zerohedge.com/news/2014-06-18/uk-wholesale-gas-prices-rise-after-ukraine-gas-halt-kremlin

    How soon it will hit consumers, I don't know. It shouldn't for a long time if the 'we buy well in advance so any drop in price is irrelevant for years' line is to be believed.
  • taurus_67taurus_67 Posts: 6,930
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    rusty123 wrote: »
    I thought the wholsale gas and oil price has fallen by something like 30% over the past 12 months hence why the big 6 were getting criticised for not passing the savings onto consumers. If things in Iraq cause a spike it might only return to a level we're already paying for.

    Had the big 6 passed those savings on i'm wondering what the inflation figures would have looked like.

    That's a good point. I hope you're right and the energy companies behave themselves better this autumn.
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