Wednesday, 5 August 2009

Food price inflation starts to pick up again

Could it have anything to do with quantitative easing?

From the Daily Mail....

Families are still suffering punishing rises in the cost of living as food prices continue to go up. A survey puts food price inflation at 3.8 per cent, at a time when many are struggling with redundancy or pay freezes.

The spiralling food bills have coincided with bumper profits for the 'big four' supermarkets - Tesco, Asda, Sainsbury's and Morrisons. However, they argue they are having to pay more for the food because of rising production costs.

10 comments:

Anonymous said...

"Let them eat inflation." Gordon Brown, Prime Minister, UK, (2007-2009)

You know what? I don't f-ing care anymore. If people continue to allow this government to carry on, then they deserve food inflation. Now shut up and eat your quantitative easing!

Anonymous said...

Alice,

Last year we had a long debate on the merits of CPI relative to RPI. If I recall rightly, you took the view that RPI was an infinitely superior measure. Less than twelve months later and you no longer mention it. Instead, you've found a whole new series of measures to illustrate your fantasy of rising prices. Today it's FPI (food price inflation) from an entirely unofficial source. Last month it was API (Argos price inflation – I kid you not) and before that it was US medical care cost inflation (really, it was).

Mind you, Alice isn't the only one trying to fiddle the inflation figures. Many of the sources on which she draws are also in the same business. The Daily Telegraph even went as far as developing its own inflation index – RCLI (Real Cost of Living Index – what else?). In order to prove inflation was rampant (and that official figures were manipulated), they stripped out all manufactured goods – presumably on the grounds nobody ever buys mobile phones, iPods, Blackberries, computers, cars, washing machines, fridges, flat screen TVs, games consoles, microwave ovens, freezers etc. They did include food, fuel and council tax though. The result wasn't what they were expecting. By mid June of this year RCLI stood at minus 10.3%. In spite of quoting extensively from the DT, Alice never mentions the Real Cost of Living index – funny that!

Young Mark

Anonymous said...

also portion sizes are getting smaller whilst the price remains the same

electro-kevin said...

Young Mark's comment warrants an answer, Alice.

I've managed to keep costs down by shopping around, buying budget brands and avoiding non-essentials.

Manufactured imports have risen markedly. Thank god for the internet.

Sureseam said...

We have had an artificially strong currency over the last decade because of the city. Now that tide is ebbing food will start to seem expensive and QE will only add to the downward drift in exchange rates.

It would also be true to say that food prices over the last decade have been a lower proportion of incomes than at any time in known history; so in some sense there is a "revert to mean" shift happening.

As far as indices go; I STILL want a UK "shadow stats" website but lack the economics expertise to do it myself. If I started rabblerousing then maybe the momentum would start to happen?

Anonymous said...

If it is so profitable to produce food then why is UK farm production falling? More price rises to come I think

Sureseam said...

To anon@22:53

UK farm production has fallen year on year for a long while in response to a strong sterling and also muscular buying practices of supermarkets.

Farm gate prices could rise on the back of a weaker pound; however the supermarkets would remain determined players.

Many in the investment world perceive commodities - even agricultural ones as the strong markets over the coming years.

Yes there will be price rises however - how do you spot a real price hike once inflation has really taken off?

roym said...

continued quoting from the daily wail is going to seriously damage the credibility of this blog.

Alice Cook said...

Young Mark,

I would like to think that this blog considered a few more issues other than the relative merits of the RPI or the CPI as a measure of inflation. But you are right, I think the RPI is a better measure.

The thing that really interests me at the moment is QE, and whether it will lead to a surge in the price level. Therefore, I am looking around for leading indicators and trying to share any evidence I find with my readers.

As for fiddling inflation figures, all I can say is that I don't collect any. I merely report what is collected by others.

Besides, I hope you are right, Mark, and I am wrong. I really do. Inflation shares the hell out of me. It is an arbitrary tax and I know that I, and many like me, have no protection against it.

Alice

Alice Cook said...

Sorry, that should have been "Inflation scares the hell out of me"