The Bank expects inflation to rise to 4% ...
Inflation CPI basis hit 3.2% in August. The move was pretty much expected. The Bank expects inflation to rise to around 4% by the end of the year. For the moment, that looks like a pretty fair bet. The big question remains, just what exactly happens after that!
Strange things in the mix. Goods inflation increased to 3.3% in the month. Service sector inflation increased to 3.0%. Second hand car prices increased by over 18%. Air passenger transport costs increased by 14%. Motorbike prices were up by 12%. The cost of fuel was up by 18%.
Want to go out for a meal? In the restaurant you will be paying at least 8% more. Want to stop over? Accommodation price rises were 12% higher in August. OK, you may have to make your own bed and breakfast but hey that's life post pandemic, as the world tries to return to normality.
Nothing in the data suggests a rise in food prices as yet. DIY, household appliances and furniture prices averaged an 8% increase. Everything to suggest inflation is always and everywhere a transitory phenomenon. We had expected inflation to peak in August. The continued highs in the oil market suggest the Bank scenario is more likely now ...
Manufacturing Costs Up 11% ...
Manufacturing costs increased by 11% in the year to August. The latest data suggests the May peak was illusory. Costs for manufacturers continue to rise, up from 10.4% in July.
Crude oil prices were up by 50%. Metal prices up by 20%. Chemical costs were up by 12%. Oil closed up at $74.82 at the end of the week. The inflationary impact year on year, will continue into the first quarter of 2022.
Iron ore prices dropped by 20% last week. Copper prices are down by by 12% from the peak in May. Aluminum prices on the other hand, are pushing new highs. Prices are up by 60% year on year. The coup in Guinea, one of the world's top bauxite producers, spooked an already jittery market.
No let up in shipping costs either. A container from Asia to the West Coast USA is priced out at $20,000 up from $2,500 at the start of the year. Energy costs were threatened by a spike in gas prices. Prices have doubled over twelve months. Record gas prices in Europe have forced shut downs in fertilizer plants, indirectly creating a carbon dioxide shortage with implications for food and farming production.
Leaders of the top U.S. industrial companies gathered virtually this week, at the annual Morgan Stanley Laguna conference. Much of the discussion centered on the rising costs of raw materials, labor shortages and logistics. Businesses are faced with the increasingly difficult challenge of getting enough supply to keep up with demand ... world trade was up 22% in the second quarter as strong growth returns ...
Vacancies Rise To Over One Million ...
In the UK the number of vacancies in the economy increased to over one million in August. Accommodation, food featured along with vacancies in retail, health and social care.
The number of people unemployed fell slightly to 1.550 million. The u-rate eased to 4.6%. The number of people on furlough fell to 1.6 million at the end of July.
One million vacancies, 1.6 million on furlough, 1.6 million unemployed. The end of the furlough scheme at the end of September will make for an interesting scenario towards the end of the year. The hope is a significant surge in job losses can be avoided. Market forecasts are for the unemployment rate to increase to 5.3% in the final quarter before easing back towards current levels by the end of next year ...
Want to know more, access our latest updates on inflation, earnings and the forecast update ... Join The Club become a Premium Subscriber, access all the data, don't miss out ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
|The Saturday Economist|
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.