Forever the Optimist!
CPI eased to a 1-year low in March, while retail price inflation turned negative for the first time in nearly 50 years, official data showed last Tuesday. The figures confirmed expectations price pressures are starting to subside after several months of unexpected resilience but show inflation remains higher in Britain than in many of its trading partners. Consumer prices rose by 0.2 percent in March, taking the annual rate down to 2.9 percent, its weakest since March 2008. Retail price inflation, a wider cost of living index which includes housing costs, was flat on the month and fell to -0.4 percent year-on-year, the first negative annual reading since March 1960. The housing component of the RPI index fell 10.3 percent on the year in March, the biggest fall since the series began in June 1948, reflecting the slashing of British interest rates to a record low of 0.5 percent. Last Wednesdays releases revealed that Britons claiming jobless benefit rose by less than expected in March, although the total in unemployment number surged higher and government borrowing hit a record high. Data showed the claimant count rate rose by 73,700 in March, well below forecasts for a rise of 120,000, however, the broader ILO measure, which includes those out of work but not claiming benefits, spiked by 177,000 in the three months to February, the biggest jump since 1991. That pushed the level of total unemployment to its highest since early 1997, just before the Labour government took office. Following on from this Government borrowing in the 2008/09 tax year was reported at £89.958bln, much higher than the £77.6bln forecast in the government's pre-budget report last November, and the highest since records began in 1946/47. Wednesdays Budget presentation by Mr. Darling certainly proved to be an eye opener as he presented what seemed to be facts that were way above his previous predictions for the UK Economy. He reported Britain's budget deficit will soar to a record 175 billion pounds as the economy shrinks at its fastest pace since World War Two this year. To help bridge the yawning gap, Darling will slap a new 50 percent tax rate on the highest earners but the government will still have to issue a record 220 billion pounds of government bonds, way above even the highest forecasts. However, his prediction (for what it’s worth) is that the economy would start growing again next year, by as much as 1.5 percent, and then start steaming ahead at a rate of 3.5 percent to bring the public finances back on a sustainable path…yet again a very optimistic prediction Mr. Darling!
26 / Apr / 2009