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UK Inflation Slumps Below BoE Target (But Price Pressures Are Building)

Tyler Durden's picture




 

Despite all the hoop-la of the UK economic recovery - and Mark Carney's credibility-sapping dynamic forward guidance "we'll know it when we see it" perspective - billions in QE has failed to spark enough 'inflation' to break the Bank of England's oh so critical 2% inflation target. For the first time since November 2009, UK CPI fell below the 2% 'threshold' in January (must be the weather) as Japan's deflation exporting (what goes up there must go down everywhere else) spreads from the US to the UK. Of course, the silver lining for equity markets is that this provides Carney just the right ammo to keep rates lower for longer at their record lows; but price pressures are building...

 

Of course this hasn't stopped QE from driving UK house prices and the equity market to record highs as 'asset' inflation is all that really matters...

 

As Stefan Karlsson notes - it's definitely not great news...

For the first time since 2009, when oil prices had collapsed and the VAT had been temporarily reduced, British inflation fell below 2%, to 1.9% to be more precise. Note however that this is still more than a percentage point higher than in the euro area, despite the fact that the pound is up about 6% against the euro (and up about 6% against the U.S. dollar) during the latest year.

 

When price inflation continues to exceed that in your major trading partners despite a rising currency, this suggests that domestic price pressures are very strong.

 

In Britain's case it doesn't reflect rising wages however, but falling productivity.

But hey - why not bid the FTSE up 1% anyway and outperform all European stocks.

 

Charts: Bloomberg

 

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Tue, 02/18/2014 - 14:03 | 4448807 Rising Sun
Rising Sun's picture

fuck you Carney!!!!!

Tue, 02/18/2014 - 14:16 | 4448871 Harlequin001
Harlequin001's picture

Oh, that's easy, why not just include the higher prices in the inflation calculation?

Oh...  er.. hang on...

Tue, 02/18/2014 - 14:18 | 4448886 Looney
Looney's picture

Higher prices ain't no significunt  ;-)

Looney

Tue, 02/18/2014 - 14:46 | 4449025 TruthInSunshine
TruthInSunshine's picture

pushing on a STRING THEORY in action.

Tue, 02/18/2014 - 16:14 | 4449384 Occident Mortal
Occident Mortal's picture

The UK is actually growing and the pick up is noticeable.

But it's long overdue, and we are still not at 2008 levels of GDP.

Everyone knows the UK was hit harder than most countries because it's financial services industry was so large.

What the UK really needs is a revival of the North, which is historically the UK's manufacturing base. If China implodes it would probably be good for the UK as Anglo-Sino trade is actually rather undeveloped.

But the UK isn't a good place to do large scale process type work. Brit are not good at mass production, they get too bored. We are weak at optimizing something to near perfection (a German thing) we would rather experiment with something new and discover stuff.

Brits are good at esoteric work, and lousy at working as a collective.

We also missed the boat on a software industry, which is something we should have been very good at.

Seems we're sticking our four main exports, defence contractors, pharmaceuticals, oilfield services, and financial services...

Guns, drugs, oil and money laundering. Probably why we make such good movie villains.

Tue, 02/18/2014 - 17:53 | 4449870 Going Loco
Going Loco's picture

"We also missed the boat on a software industry"

What about ARM?

Don't forget our very successful film industry, growing auto exports, world-leading developments in bio-technology, fuels for ships, pumping technology, etc. etc.

Tue, 02/18/2014 - 14:04 | 4448812 akak
akak's picture

And with official UK inflation below 2%, I have utterly no doubt that UK consumers are seeing general price increases in the real world of 5-6% (at least).

Tue, 02/18/2014 - 14:06 | 4448825 Winston Churchill
Winston Churchill's picture

Same as here,lockstep over the cliff.
Mind the step.

Tue, 02/18/2014 - 14:22 | 4448916 smacker
smacker's picture

Eggsactly.

But there is zero debate on MSM of whether the official inflation rate bears any relationship to reality. And of course it doesn't.

But hey, if the TRUE inflation rate was reported, the GDP figures would be zero or even negative, confirming what alert folks already know: "there is no recovery".

Tue, 02/18/2014 - 14:54 | 4449059 akak
akak's picture

 

But hey, if the TRUE inflation rate was reported, the GDP figures would be zero or even negative, confirming what alert folks already know: "there is no recovery".

BINGO!!

Tue, 02/18/2014 - 15:13 | 4449142 TruthInSunshine
TruthInSunshine's picture

For those 'Muricans amongst us who have been to the UK recently and over the years, it wouldn't surprise me in the least if their true, non-statistically molested rate of inflation has been close to 5% annually.

Consider that if I'm correct, that's an inflation rate, if continuous, roughly equal to a doubling of prices every 13 or 14 years or so* (the inflation gets compounded, just as interest rates would; see this: http://www.inflationdata.com/inflation/Inflation_Rate/Long_Term_Inflation.asp ).

 

*For example, if inflation were a true 3.22% - at that rate prices will double every 20 years. 

 

Tue, 02/18/2014 - 15:12 | 4449138 Rip van Wrinkle
Rip van Wrinkle's picture

And some.

Tue, 02/18/2014 - 14:06 | 4448823 Max Damage
Max Damage's picture

According to my weekly shopping, and house running expenses my inflation is not 1.9% so fuck off you lieing twat Carney

Tue, 02/18/2014 - 14:12 | 4448851 youngman
youngman's picture

As long as they are not buying a house...that is going up in price quite fast

Tue, 02/18/2014 - 14:16 | 4448878 Wile-E-Coyote
Wile-E-Coyote's picture

Only in London, and that is being caused by foreigners getting rid of their Fiat.

Tue, 02/18/2014 - 17:56 | 4449888 Going Loco
Going Loco's picture

Not true. I own 3 buy-to-let investments well away from London. In the last year I have seen a significant increase in prices, so much so that when I tried to buy a 4th property all the candidates were 25% more than I had paid for the same sort of thing a year ago and I had to walk away.

Tue, 02/18/2014 - 14:13 | 4448859 Wile-E-Coyote
Wile-E-Coyote's picture

UK inflation way above 1.9%. Food is between 6-9% easy.

Tue, 02/18/2014 - 14:19 | 4448875 Dr. Engali
Dr. Engali's picture

Falling productivity? You mean to tell me that people are getting tired of busting their asses just to have their buying power inflated away? No freaking shit!

Tue, 02/18/2014 - 14:15 | 4448876 LawsofPhysics
LawsofPhysics's picture

Again with the false "flation" bullshit.  No society/currency in the history of humanity has ever collapsed/died because their purchasing power was too strong.

Tue, 02/18/2014 - 14:18 | 4448880 ebworthen
ebworthen's picture

0% on savings, robbing the public Treasury, and blowing another bubble; those Central Bankers are highly skilled tapeworms.

Alchemists had as much luck turning lead into Gold as Central Banks have improving employment and keeping real inflation down.

CNBC presenting "FROZENomics" and why cold weather in Winter is suppressing the economy.

I suppose in Summer it will be "SWELTERnomics" with heat in Summer suppressing the recovery.

Will blooming Tulips in Spring and falling leaves in Fall trip people up and prevent them from shopping?

Tue, 02/18/2014 - 14:17 | 4448888 q99x2
q99x2's picture

PRINT

Tue, 02/18/2014 - 14:33 | 4448974 Glass Seagull
Glass Seagull's picture

 

 

sell the pound/cad.

Tue, 02/18/2014 - 14:36 | 4448986 Inthemix96
Inthemix96's picture

Fucking idiots.

In just under one year here, my gas and combined electric price rose 36.1%.

1.9%?  If I ever meet mervin king I will do that cunt right the fuck in.  Filthy, nasty, protected scum.  Kiddie fidling nation wrecking scum is all they are.

;-(

Tue, 02/18/2014 - 18:49 | 4450091 koperniuk666
koperniuk666's picture

when the time comes we can burn him along with that spineless lying useless c.nt cameron and oxygen thief clegg

Tue, 02/18/2014 - 15:08 | 4449121 MiniCooper
MiniCooper's picture

I live in the UK and am not seeing sub 2% inflation in my food and energy bills thats for sure.

What I am seeing is houses prices in London and South East rocketing upwards while wages stagnate.

Foreign buyers in London bought 50% of all houses sold over £1 MILLION last year.

Local UK residents are stretching with debt again to cover basic living costs and to buy a home because wages are not covering it. Back to 2006 again and we know how that ended. Outside Lonodn and South East the situation is even more dire. High streets and shopping centres (malls) with a lot of baorded up shops and those shops still open have very few customers. Real wage deflation going on and on. Many people have already seen real income falling for a decade now. Tradesmen, plumbers and carpeneters working in my house say they have not been able to raise their quoted rates for a decade.

We have a slow growth and high inflation economy with falling real wages - except in financial services and at the very top layers of management in privaye andpublic sector. The 5% are doing nicely and the rest are struggling.

Tue, 02/18/2014 - 15:11 | 4449133 Spungo
Spungo's picture

We need to stop this deflation before chavs can afford to eat food and they start breeding and never having jobs

Tue, 02/18/2014 - 15:17 | 4449165 Racer
Racer's picture

Hmm, a basic tin of tomatoes, up by 6% in the last few weeks and mozzarella up by 25% in the same timescale.

Fuel bills up by about 10% this winter

Yeah 2% inflation or less, in all the things you don't need

Tue, 02/18/2014 - 17:03 | 4449644 No Euros please...
No Euros please we're British's picture

So obviously total shit. In 2009 petrol was £1/litre, now it's £1.30/litre. Let me see, mmmmm is that nearer 2% or nearer 6% inflation? Strange how inflation is so low when the cost of living keeps increasing at a phenomenal pace. Never mind, celebrity shit house is on the tv tonight, best not to worry.

Tue, 02/18/2014 - 18:16 | 4449976 MagicMoney
MagicMoney's picture

Makes one wonder where these people get that 2% inflation figure from.  Why is 2% inflation necessarily a good thing? It seems to be inflation is really just something that benefits counterfeiters, or government.......

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