The week-end press had started to wake up to the private sector squeeze which we have been talking about on this website for the last year, the squeeze which was even heralded by the Bank of England itself. The high rate of inflation coupled with a low rate of wage and salary increases is squeezing spending power.
At the same time there is a recovery underway, which has been best so far in manufacturing. The Bank which likes to cling to the notion that there must be plenty of spare capacity in the economy because of the depth of the recent recession, should get out more. They would discover that large manufacturing companies rely on a worldwide supply chain. They would learn that there are shortages of raw materials, components and manufactured goods around the world. The Japanese earthquake and tsunami has just made this worse by removing some Japanese capacity. The fast growth in India, China, Brazil and the other emerging markets is keeping things lively.
Some of the world’s main manufacturers are trying hard to get more components and materials to meet their growing output. Some are even talking of putting customers onto quota and allocation, as they cannot keep pace with demand. In the UK input inflation is running at very high levels. It’s not just oil and energy that has rushed up, but so have metals, foodstuffs and a range of semi manufactures and components. The rapid printing of dollars, the strong money and demand growth in the BRIC and related countries, and the shortages now emerging are inflationary as some of us have been predicting for many months. In China, India, Brazil, Australia and elsewhere interest rates have been put up to cool things down a bit. The cost of inputs to business shot up by almost 15% in the UK over the last year. Did the Bank forecast that? Is all going to plan?
In the UK the high costs of motoring appear to be hitting the numbers of people travelling, going to shops and attractions. It is good news that the government now says it wants to do something about that, starting with fewer MOTs. It also needs to do more to ease congestion on the roads at busy times, which is often the result of poor traffic engineering, or the direct result of Council and government spending to cut the flows on the road with expensive new traffic engineering schemes.
I was also pleased to read that the government plans to ban Councils from taxing and fining people who fall foul of increasingly arcane rules on rubbish. That may not be very localist, but it is very welcome news to people who now fear the bin police along with all the rest of the bureaucratic snooper army.