Inflation making a comeback?

gurramok

http://www.rte.ie/business/2010/0610/inflation.html

Up by 0.6% in just 1 month:eek:

RTE wrote:

Official figures show that consumer prices fell by 1.1% in the year to May, the smallest annual drop since January last year.

The Central Statistics Office said prices crept up 0.6% compared with April, the fourth monthly increase in a row.

Among the main factors in the monthly rise were higher mortgage repayments, higher air fares and an increase in the cost of motor fuels.

Prices in the housing, water, electricity, gas and other fuels category rose by 2.9% in the month. This category includes mortgage repayments, which jumped 6.1% in the month as increases in variable rates from some banks fed through to home owners. Also in this category, home heating oil prices climbed 8.5%.

Transport costs were up 0.8%, as air fares jumped 14% and petrol and diesel prices both rose by 1.5%. Food prices also crept up 0.4% in the month, but clothing and footwear prices dropped 1.1%, while furniture prices also dipped slightly. Alcohol prices fell 0.4% from April.

The EU's harmonised measure of prices - which excludes mortgage repayments - rose 0.3% from April, giving an annual fall of 1.9%.

Goodbody economist Deirdre Ryan said the rate at which deflation was easing was surprising. She said higher mortgage repayments contributed to half of the monthly increase. The economist said the annual rate was likely to turn positive before the end of the year.

Bloxham economist Alan McQuaid said that - apart from energy and recent increases in mortgage interest rates - the inflation outlook is still dominated by disinflationary pressures. He is predicting an average fall of 1.1% in prices this year, compared with 4.5% last year.

Say thanks to the rescued banks and OPEC

Liam Byrne

I have no idea why inflation is seen as a good thing.

All it does is make us uncompetitive.

eoinbn

Liam Byrne wrote: »

I have no idea why inflation is seen as a good thing.

All it does is make us uncompetitive.

Economics is a funny business.
Inflation can be seen as been a positive for a number of reasons. It can be an indicator for increased borrowing which is oddly enough a good thing as debt=money. People are more inclined to invest money when inflation is on the rise as their money is losing value if they don't. It also 'reduces' the cost of borrowing as if you borrow €10,000@10APR% to buy a car that is increasing at 5% per annum then the real interest rate is 5%.

Liam Byrne

Thanks eoin.

I'd guess that it perversely encourages some types of spending, too, since you'd want to buy something now instead of next year when it's 5% dearer.

That said, when people have no money or disposable income, in a country that was already losing multinationals due to the cost of operating here, it's a bad sign.

Banned Account

I predict that we are heading for a global bout of hyper-inflation. There has been far too much money conjured up out of thin air and pumped into the system to try and stave off the recession.

This money will make its way out into circulation long before in can be pulled back. Ironically, as inflation increases, the central bankers will respon by pushing up interest rates, which will feed into inflation statistics.

In this country, this will all happen at the same time as peak unemployment and we will see the total value of mortgages in arrears treble from the current €6bn to closer to €20bn.

Doom and gloom I know, but it is a-comin'.

ei.sdraob

gurramok wrote: »

Say thanks to the rescued banks and OPEC

say thanks to the devalued euro :cool:

and conjuring billions out of thin air to help reckless states

eoinbn

Fitzcaraldo wrote: »

I predict that we are heading for a global bout of hyper-inflation. There has been far too much money conjured up out of thin air and pumped into the system to try and stave off the recession.

This money will make its way out into circulation long before in can be pulled back. Ironically, as inflation increases, the central bankers will respon by pushing up interest rates, which will feed into inflation statistics.

In this country, this will all happen at the same time as peak unemployment and we will see the total value of mortgages in arrears treble from the current €6bn to closer to €20bn.

Doom and gloom I know, but it is a-comin'.

But that is what happens when you borrow money! When one borrows money it is created and when it is paid back it is destroyed. When borrowing increases money is devalued, inflation, and when borrowing is slower than the rate that is been paid back it leads to deflation.

ei.sdraob

eoinbn wrote: »

But that is what happens when you borrow money! When one borrows money it is created and when it is paid back it is destroyed. When borrowing increases money is devalued, inflation, and when borrowing is slower than the rate that is been paid back it leads to deflation.

You can create inflation by expanding the money supply as was done in Greek mess

You can also import inflation from other countries/blocks via devaluation as has happened


You are trying to attribute this to "the economy turning the corner" but its not, more of a consequence of response (or lack of) to Greek mess,
its surprising it has happened so quickly tho, UK style uncontrolled inflation coming to the euro near you

Good thing I ploughed my savings into home/office and equipment


Now lets sit back and enjoy the show since US, UK, Japan and now EU are gone mad on expanding the money supply to fix their debt problems, its gonna be fun

ei.sdraob

A. Housing, Water, Electricity, Gas & Other Fuels up 3.7%

B. Education up 9.1% in a year

C. Transport up 4.9%

edit: how the hell does one make tables in this


cso doc here


seems like A and C are consequence of carbon tax and having the fuels (valued in dollars) imported, B is up due to more people wanting to get retrained/educated?

Économiste Monétaire

ei.sdraob wrote: »

A. Housing, Water, Electricity, Gas & Other Fuels up 3.7%

B. Education up 9.1% in a year

C. Transport up 4.9%

edit: how the hell does one make tables in this


cso doc here


seems like A and C are consequence of carbon tax and having the fuels (valued in dollars) imported, B is up due to more people wanting to get retrained/educated?

You can see a further breakdown of the 12 COICOP groups in this; liquid fuels up 48% y/y. Slightly easier to read than the Boards tables:



01 Food and Non-Alcoholic Beverages;
02 Alcoholic Beverages and Tobacco;
03 Clothing and Footwear;
04 Housing, Water, Electricity, Gas and Other Fuels;
05 Furnishings, Household Equipment and Routine Household Maintenance;
06 Health;
07 Transport;
08 Communications;
09 Recreation and Culture;
10 Education;
11 Restaurants and Hotels; and
12 Miscellaneous Goods and Services.

Godge

Économiste Monétaire wrote: »

You can see a further breakdown of the 12 COICOP groups in this; liquid fuels up 48% y/y. Slightly easier to read than the Boards tables:



01 Food and Non-Alcoholic Beverages;
02 Alcoholic Beverages and Tobacco;
03 Clothing and Footwear;
04 Housing, Water, Electricity, Gas and Other Fuels;
05 Furnishings, Household Equipment and Routine Household Maintenance;
06 Health;
07 Transport;
08 Communications;
09 Recreation and Culture;
10 Education;
11 Restaurants and Hotels; and
12 Miscellaneous Goods and Services.

So if you are over 65, with free transport, your mortgage paid, free medical card and not in education, you did better than anyone last year as all your costs went down while you were the only one in receipt of state funds (either other social welfare or public service pay had a cut) that did not see a decrease.

Even better if you are a public service pensioner who retired at a high level. Some sharing of the pain that.

Gumbo

Godge wrote: »

So if you are over 65, with free transport, your mortgage paid, free medical card and not in education, you did better than anyone last year as all your costs went down while you were the only one in receipt of state funds (either social welfare or public service pay) that did not see a decrease.

didnt the PS take a paycut?

Godge

kceire wrote: »

didnt the PS take a paycut?

Thanks. I have corrected the post as the message got lost.

What I was trying to say was that social welfare recipents took a cut, public service workers took a cut but that pensioners were spared. When you then look at the inflation figures you realise that for the vast majority of pensioners they had serious deflation thus boosting their income even further. The social welfare recipents, particularly the newly unemployed and the public service workers were hit on the double by the pay/SW cuts and by the fact that the recent inflation hits them.

If I am not clear now, it must be the wine:)

Japer

ei.sdraob wrote: »

say thanks to the devalued euro :cool:

and conjuring billions out of thin air to help reckless states

+1 Nearly everything you buy in our shops ( excluding food ) is imported from outside the EC, as is most of our energy needs ( oil etc ).
Those suppliers still need to be paid and the euro does not hack it against the dollar or even sterling.....tell them you will give the same same amount of euro as last year and they will not accept.....tell them you will pay the same amount in stg or dollars as last year for the same qty of goods and they will. The euro was a big mistake as a common currency for Greece, Ireland, Germany etc clearly did not work. During the boom we could not have our own interest rates, the Germans set them to suit themselves.
If we had higher interest rates we would not have had such a property bubble.

thebman

Japer wrote: »

+1 Nearly everything you buy in our shops ( excluding food ) is imported from outside the EC, as is most of our energy needs ( oil etc ).
Those suppliers still need to be paid and the euro does not hack it against the dollar or even sterling.....tell them you will give the same same amount of euro as last year and they will not accept.....tell them you will pay the same amount in stg or dollars as last year for the same qty of goods and they will. The euro was a big mistake as a common currency for Greece, Ireland, Germany etc clearly did not work. During the boom we could not have our own interest rates, the Germans set them to suit themselves.
If we had higher interest rates we would not have had such a property bubble.

As we've seen the government were throwing fuel on the fire with property incentives much too late. The government could easily have put in measures to discourage property purchasing and try to calm the boom but refused.

As such there is no evidence that the low interest did anything but help government policy which was to blow the bubble as high as possible. If we could have set our own interest rates they would have likely been just as low to encourage property purchasing.