German inflation outstrips UK

In confirmation that the rise in western inflation is mainly to do with rising commodity prices, especially oil, German CPI inflation today hit 1.9% compared to the UK’s 1.6%. It confirms that inflation in the UK is not special to UK and  has not been  caused by sterling weakness and Brexit.

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31 Comments

  1. Mark B
    Posted January 30, 2017 at 6:31 pm | Permalink

    Weakness in Sterling will cause price inflation when those commodities like oil are priced in dollars.

    This was always going to happen and BREXIT is most certainly not at fault. Oil is trading around $50 a barrel which is quite low. With President Trump indicating that low energy costs are vital to reinvigorate the US economy, it could go even lower.

  2. Leslie Singleton
    Posted January 30, 2017 at 6:56 pm | Permalink

    Dear John–Why talk about sterling weakness? Why be unnecessarily and negatively tendentious when you could have said by the lower sterling exchange rate? The lower rate could be beneficial.

  3. The Prangwizard
    Posted January 30, 2017 at 7:28 pm | Permalink

    A little off topic, but just endured my local BBC TV evening news in Oxford. Reporting on a very large investment by a drugs company they claimed it as ‘despite Brexit’. They slip the poison all the time. Have they ever reported good news as ‘because of Brexit’?

    Government failed to reform the BBC when they had the chance. I dare say the BBC will claim that ‘Fake News’ comes from elsewhere in the forthcoming enquiry; they will assert they are innocent of any failure in accurate representation. It is not the case.

    • Bob
      Posted January 31, 2017 at 9:39 am | Permalink

      @The Prangwizard
      The Tories failed to reform the BBC when they had the chance.
      Have you ever wondered why?

      • Lifelogic
        Posted January 31, 2017 at 6:39 pm | Permalink

        Cameron even put Baron Patten of Barnes in as Chair of the Trustees, to reinforce the “BBC think”, wrong on every major issue agenda, one assumes.

    • matthu
      Posted January 31, 2017 at 3:51 pm | Permalink

      Would “despite alarmism surrounding Brexit” suffice?

  4. J.White
    Posted January 30, 2017 at 7:37 pm | Permalink

    Bet the BBC and Sky News won’t report that! When they reported we are the fastest growing economy in the G7 they still had to say but wait to see what happens. They only care about pushing their own pro EU views. I am sick and tired of everything being blamed on Brexit. There are no positives to Brexit according to the BBC. If it’s not Brexit it’s down to the drop in the pound. The BBC must hate it when figures and the inflation rates shows up their lies.

  5. Lifelogic
    Posted January 30, 2017 at 7:49 pm | Permalink

    Indeed, but the weak pound (and a weak EURO) certainly do not help.

    Of course were Theresa May to go for cheap reliable energy, the abolition of the climate change act, go for lower simpler taxes, a bonfire of red tape, for easy hire and fire, a business friendly agenda and cancelling her daft vanity projects then sterling would be much stronger. Also if they BoE had realistic interest rates it would be too.

    But she is clearly more Ted Heath/John Major (or even Ed Miliband) than a Tory.

    • Bob
      Posted January 31, 2017 at 9:50 am | Permalink

      Osborne’s auto enrolment pension scheme is a masterclass in unecessary over complicated time consuming bureaucracy.

      I don’t need to open bank accounts for my employees they just provide me with their bank details and I pay them accordingly; they could just as easily provide me with pension account details.

      It’s utterly ludicrous that every employer no matter whether it’s a small business or an individual employing a cleaner or a nanny has to go through this mind numbingly bureaucratic nonsense.

      In my naivety, I thought Mr Hammon would reform this stupidity.

      • Lifelogic
        Posted January 31, 2017 at 6:44 pm | Permalink

        Indeed alas Hammond seems to be as dire as Osborne. He even kept stamp duty at the absurd rate of up to 15%, the sugar tax, the central wage controls and actually put insurance tax up yet again to 12%. Clearly he has not understood the Laffer curve, basic economic or the productivity value of getting government out of the damn way.

    • fedupsoutherner
      Posted January 31, 2017 at 10:05 am | Permalink

      Good grief LifeLogic, can you imagine the uproar on the streets of the UK if Mrs May had the audacity to cancel the climate change act??? What would all those poor luvvies do? And what about all those polar bears we would be guilty of putting to death? With Brexit and the toxicity being reported by the BBC the last thing any government will sensibly do is repeal the act. They are all too frightened of the NGO’s and our celebs. Let’s face it, their opinions are far more important than the state of the UK economy.

      • Lifelogic
        Posted January 31, 2017 at 6:49 pm | Permalink

        Indeed, May is a dithering sheep not a leader, as one might expect of a geography graduate. Certainly no Richard Feynman, Milton Friedman, or Alistair Heath not even a Lady Thatcher, more of an Ed Miliband infact.

  6. turboterrier
    Posted January 30, 2017 at 7:54 pm | Permalink

    Cannot help but wonder how much if any the massive influx of refugees might have had an impact on these figures working on the adage of supply and demand

    • Narrow Shoulders
      Posted January 31, 2017 at 8:16 am | Permalink

      £22 billion is the cost of the refugees to Germany I have read. That is a large spike in demand and will have done wonders for German and Euro zone GDP for those who measure these things as positive.

  7. Julien Tabulazero
    Posted January 30, 2017 at 8:59 pm | Permalink

    Dear sir,

    As companies run through their inventories as part of their normal operations, shouldn’t any price hike be postponed until the said companies have to re-stock ?

    In short, it may be too soon to see the effect of a weaker pound. That said, if you look at the outlook provided by many retailers for 2017, they are pretty dire with multiple warnings about future price hikes. Some of this could be sheer prudence from management teams in an uncertain world or genuine cause for alarm.

    Only time will tell.

    Best regards

    • Bob
      Posted January 31, 2017 at 10:00 am | Permalink

      @Julien Tabulazero
      When fixing their pricing, companies may consider either:
      – Historical cost
      – Replacement cost
      – Competitor pricing
      – A blend of any of above

      In all liklihood, the full effect of any currency fluctuation takes a while to filter through, depending on turnover rate. I would guess that most businesses would have fully factored in the currency adjustment by now. Obviously, perishable goods would adjust very quickly.

  8. zorro
    Posted January 30, 2017 at 9:42 pm | Permalink

    It will be intereting to see how the Germans push EU policy on interest rates now they have rising inflation. The tea leaves do not look good for Germany in the medium to long term…. They are losing control of events in the European sphere mainly housted by their own petard.

    zorro

  9. Jack
    Posted January 30, 2017 at 9:49 pm | Permalink

    A weaker currency is always a bad thing, but the GBP depreciation fears are way overblown.

    Having a weaker currency means those outside the UK can afford to consume more of our domestic output without the need to send us as much of their output. Imports are real benefits and exports are real costs – the purpose of exports is to get as many imports as you possibly can in exchange. A weaker currency makes that a harder challenge for us.

    That said, when we have a government that has inflicted fiscal tightening and kept us poorer for no reason other than a failed understanding of the monetary system, there are more important things to worry about.

    • Jack
      Posted January 30, 2017 at 9:54 pm | Permalink

      Hopefully Brexit means we’ll get a larger government deficit to restore private sector / household balance sheets, and boost aggregate demand enough to hit at least 6% annual real GDP growth. That should be the minimum target!

      But, alas, I’m not holding my breath. Everything I’ve heard from the government is based on the false belief that the UK government is just like a user of the Pound sterling, and has to tax or borrow in order to spend; when in fact it is the sovereign creator of the currency.

    • Hamsterwheel
      Posted January 31, 2017 at 12:14 pm | Permalink

      After the vote, it was supposedly terrible for us to be at the back of the trade queue.
      What with all the anti-Trump hysteria, it’s now terrible that we’re closer to the front.

      I do wish people would make their minds up…

  10. DaveK
    Posted January 30, 2017 at 10:34 pm | Permalink

    Apologies for being off topic, but may I ask if you signed the e-petition to prevent Mr Trumps state visit?

    If you go to the website and click on the link at the bottom of the page named “Get petition data (json format)”, leading here: https://petition.parliament.uk/petitions/171928.json where if you search the page you will find your own name as well as the PM. Perhaps this could get mentioned by the BBC as “fake news”.

    Reply Seems to make a mockery of the petition. I certainly did not sign it

    • Denis Cooper
      Posted January 31, 2017 at 9:35 am | Permalink

      Well spotted. It seems that MPs may have been signed up en bloc. It also seems that loads of signatures have come from abroad, of course it is only necessary to lie that you are a British citizen. I doubt that any of this will get mentioned in the media but I think that MPs whose names have been added by others without their knowledge are in a good position to complain, possibly by raising a point of order with the Speaker as this is a petition to Parliament. Meanwhile here is a counter-petition:

      https://petition.parliament.uk/petitions/178844

      • alan jutson
        Posted January 31, 2017 at 1:44 pm | Permalink

        Denis

        I see the new petition (wanting Trump to visit) is now 104,000 and rising.

    • Hamsterwheel
      Posted January 31, 2017 at 11:29 am | Permalink

      Instead, I signed the one that approves of the visit!!

    • Felix
      Posted January 31, 2017 at 5:40 pm | Permalink

      I have contacted my Member of Parliament on the subject of MP’s apparently having signed this petition to deny Mr Trump a State Visit and have received the following reply.
      “Thank you for your email to Richard Benyon.

      Richard will be replying with a full response in due course. However, to the point about seeing various MPs’ names on the data list provided, the MP names refer to the number of people from within the Member’s constituency. So you’ll see this where Richard’s name appears:

      {“name”:”Newbury”,”ons_code”:”E14000830″,”mp”:”Richard Benyon MP”,”signature_count”:2817}

  11. More bad herr days
    Posted January 31, 2017 at 4:16 am | Permalink

    Pundits say the release of German CPI statistics led to the sudden change in the Euro exchange rate.
    It must be terrifying for small Euro-nation states. However hard they work, their currency is in fact Germany’s own currency. Their workers’ work is valued not in itself but only through the prism of Germany; their prosperity despite their own best efforts comes to nothing if Germany’s workers get backache, throw sickies, don’t learn German fast enough.Not assimilate the German work-ethic. Hard.

  12. Newmania
    Posted January 31, 2017 at 7:13 am | Permalink

    John . Its really simply . When we decided to impoverish ourselves the pound started to go down and it has gone down about 20%. That means , now follow closely here , that stuff costs more .
    That costing more phenomenon , that causes inflation and your theory ” Another country causes inflation so it can`t anything we did ” is a bit like recommending we all continue smoking because your old granny dies of lung cancer and never smoked in all her puff….

    As I have long predicted , the graceful glide between “It will be fantastic ” to” Don`t blame Brexit” was never going to be long coming and here we are .

    • Denis Cooper
      Posted January 31, 2017 at 9:50 am | Permalink

      So we decided to impoverish ourselves in the summer of 2015, did we?

  13. formula57
    Posted January 31, 2017 at 10:13 am | Permalink

    You are doubtless right but I am sure the likes of BBC Remoaners could conceive that the harmful effects of Brexit are not confined to the UK, rather they are now being felt in Germany!

    • Patrick Hurd
      Posted January 31, 2017 at 2:34 pm | Permalink

      Good point!

  14. Chris Bowley
    Posted February 2, 2017 at 9:13 pm | Permalink

    I wonder whether the people that write about the inflation figures or set interest rates do much shopping in supermarkets. My own observation is that supermarket food price rises in January alone have been surprisingly high, I’d say at least 10%. To some extent the price rises now come after a period in which the supermarkets have been under great pressure to keep prices down so are unlikely to continue at this rate. However, anybody setting interest rate policy on the assumption that CPI will stay around 2% is blind or uninformed.

    Reply Food is a small proportion of the total, and seasonal and perishable food which has gone up a small proportion of food.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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