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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Inflation CPI Hits 3.7%, Higher than Zimbabwe, Britain Sleep Walking towards Wage Price Spiral

Economics / Inflation Jan 19, 2011 - 01:07 AM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleUK Inflation for December 2010 soared to CPI 3.7% from 3.3% which is set against academic economist expectations of just a few hours earlier of 3.3%. This now puts UK inflation Higher than that of hyperinflation prone Zimbabwe's CPI at 3.2%, thus making a mockery of long standing commentary in the press that it was ridiculous to compare Britain's inflation problems with that of Zimbabwe.


Meanwhile the more recognised measure of Inflation RPI stood at 4.8% and real inflation at 6.46%, as the official inflation indices have been systematically doctored to under report real inflation by successive governments.

The Bank of England MPC members continue with the mantra of temporarily high inflation due to short term factors. One could cut and paste from any inflation statements from MPC members of the past 12 months to hear the same propaganda out of the Bank of England. The question everyone should be asking the BoE is when does temporary high inflation stop being temporary? Originally it was for a couple of months, now it is a year, will high inflation still be temporary a decade from now? For that is how long I expect the Inflation Mega-trend to run.

The gold fish memory broadcast and mainstream media fed by ivory tower academic economists continues to tow the line of temporarily high inflation by focusing on core inflation that excludes, food and energy costs because off course everyone in the UK has stopped feeding or heating themselves, with some even blaming the inflation rise on VAT despite the fact that the VAT hike did not kick in until the 4th of Jan 2011.

UK Inflation Forecast 2011

The updated in depth analysis and forecast for UK inflation for 2011 (17 Jan 2011 - UK Inflation Forecast 2011, Imminent Spike to Above CPI 4%, RPI 6% ) concluded in UK inflation spiking higher to above 4% on release of January 2011 (Mid Feb 2011), and thereafter trend lower towards 3% by the end of 2011 and therefore remaining above the Bank of England's 3% upper limit for the whole of 2011. The Bank of England's most recent Inflation Report forecast UK CPI of 1.7% by the end of 2011, however the BoE had forecast UK CPI of just 1% by the end of 2010 (Feb 2010), which is inline with the Bank of England's permanent mantra of near always imminent deflation so as to better manage the populations inflation expectations in their favour.

UK Inflation of CPI 3.7% is precisely inline with the forecast trend, that should see the UK inflation rate soar to at least 4.2% on release of January data next month.

Bank of England Targeting Nominal GDP Not Inflation.

My ongoing UK Inflation analysis has concluded in the fact that the Bank of England has clearly not been targeting 2% inflation for some time but more likely been targeting a sustained trend to above 2% GDP. Inflation is a tool to achieve this as high real inflation allows the Bank of England to pump out economic growth propaganda to give the illusion of nominal growth when in real-terms the economy is stagnating.

The Inflation Mega-trend

We are living in a decade of high inflation that was covered at length in the 100 page Inflation Mega-trend ebook (FREE DOWNLOAD), that contains 50 pages of analysis and 50 pages of wealth protection strategies.

Western governments such as the UK and USA are printing their way out of their fiscal crisis whilst emerging markets have soaring demand for commodities, goods and services and are now seeking to export their inflation abroad so as to prevent their populations from revolting over high food prices Tunisia style.

The bottom line is that the Bank of England remains paralysed by the fear of another Banking Sector Armageddon, and is continually pressured by the UK government that seeks high inflation as a means of making stealth deep real terms cuts in spending, the deficit and total accumulated debt, thus the British economy is being sleep walked towards a wage price inflation spiral, as people refuse to be lied to anymore on temporary inflation statements and start to demand wage rises in line with inflation, at which point the BoE will again act too little too late.

The British Pound soared against the Dollar on the news that caught many market participants off guard who had been expecting the opposite to transpire. My last in-depth analysis on sterling forecast a volatile trend towards a target of £/$ 1.85 by Mid 2011 as illustrated by the below graph (04 Oct 2010 - British Pound Sterling GBP Currency Trend Forecast into Mid 2011 ) .

My next analysis will seek to come to a trend conclusion for UK interest rates in light of another year of high above target inflation and try to answer the question will interest rates rise during 2011 and if so when and by how much.

Ensure you are subscribed to my always free newsletter to get this analysis and forecast in your email in box as well as my next ebook on the Real Secrets of Successful Trading which will also be made available for free (Anticipated March 2011).

Source and Comments: http://www.marketoracle.co.uk/Article25686.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-11 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 24 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Martin
19 Jan 11, 13:33
UK Housing

Nadeem,

i've been reading your articles for years now, many thanks for all the hugely informative information. I take a great deal of interest in the economy as a whole, but none more so than the UK housing market, as my family and I are currently priced out. Will your UK housing forecast ebook be available any time soon?

Again, many thanks for all your work.

Regards


Nadeem_Walayat
19 Jan 11, 14:21
UK house prices

Hi

I have been wanting to write an ebook on the uk housing market for nearly a year, but I just do not have the time.

It would contain time critical information so would need to be written and published within 3 months, which means little time for anything else.

I will be performing analysis on UK house prices over the coming months, but it may not resolve into a ebook.

But I will be writing an ebook on the real secrets of successful trading and investing which will be much easier to do as it will not contain any time critical information.

Best

NW


Diane
20 Jan 11, 13:05
DOW from Janaury 2011

Hello Nadeem,

I always read your posts with interest.

I have been waiting for your promised mid January up-date on the DOW. Any sign of it on the horizon?

Many thanks and best wishes,

Diane :)


Nadeem_Walayat
20 Jan 11, 14:55
Dow

Hi

My current focus is on UK interest rates, but I'll do a quick update on the dow this weekend.

NW


Realinvestor
21 Jan 11, 06:35
Commodities

CPI going up as shown above is it fare to assume that Gold and Silver will go up


DDC
22 Jan 11, 16:55
Dow update

Hello Nadeem,

Just wanted to say how much i like reading your articles.

Can't wait to read your next update on the DOW!

Thanks for all the great work!

DDC


Mike Burns
23 Jan 11, 16:24
love your work

First of all i love your your work . You have made some great calls. Any idea about China ? Hyper inflation maybe ? Could they stall out their growth because they need to tighten and that would effect the world


jonnysingapore
01 Feb 11, 08:31
wage spike?

Hi Nadeem. Great writing as always.

Can you infact see a wage spike in our future with poor employment prospects?

That would appear to be highly significant for interest rates and any asset price falls.

Privileged industries (eg south east) and senior management will enjoy wage rises but it isnt clear where a wage spike can happen and hence it isnt clear where interest rates will rise significantly.


Nadeem_Walayat
01 Feb 11, 08:33
Wage Spike

Hi

I am working on the interest rate forecast that will be going out in a few days which includes the wage price spiral threat.

NW


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