It is grim out there in the real economy
Fraser Nelson 11:24am
As Gordon Brown says, Britain is indeed “leading the world” – but into recession, a property market collapse and soaring unemployment. This—not the stock market indices which mesmerise a bewildered House of Commons—is what matters.
Take today’s inflation data – it shows a 30 percent rise in electricity prices, 40 percent for fuel prices and 50 percent for gas prices. And that’s before the winter sets in and everyone puts their central heating on. Food inflation is 13 percent and within that meat is up 20 percent.
Globalisation continues to push down the costs of imports in relative terms, so overall CPI inflation is 5 percent. But those who have to set aside a large share of their budget for food and heating will be experiencing double-digit inflation.
Property is already down by 14 percent and today’s bleak RICS survey suggests this fall is accelerating. All this at a time when redundancies are running at 1,500 a day and unemployment could reach 6.3 percent by the end of next year.
This is the real economy – and a reminder how misplaced Gordon Brown’s recent outburst of joy is. There is nothing, anywhere, to smile about.
UPDATE - Apologies for startling CoffeeHousers. The Economist Intelligence Unit forecast to which I referred - in the Treasury's monthly forecast collation - was unemployment of 6.3 percent - not million. But given that we have 5.2 million on benefits as of February and unemployment since then is rising at the fastest rate in 16 years the figure may not be far short of six million by the end of next year.
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Mike, Brighton
October 14th, 2008 11:35am Report this commentDon't you mean the number of people on out of work benefits (including unemployment) could reach 6.3 million by the end of the year?
Things are bad, but not so bad that 6.3 million are unemployed.
Oracle
October 14th, 2008 11:40am Report this comment"the Treasury thinks that unemployment could reach 6.3 million by the end of next year."
This has to be a typo, right? Frazer could you reveal where you got this stat from, as even by the mess the economy is in seems an incredibly large number.
alastair
October 14th, 2008 11:46am Report this comment6.3 million unemployed? Is that including people on sickness benefit?
JD
October 14th, 2008 11:47am Report this comment6.3% surely, not 6.3 million?
Tiberius
October 14th, 2008 11:47am Report this commentFraser; that 6.3m unemployment figure is over 3 times the current level. Please tell me that's a typo!
Mark
October 14th, 2008 11:51am Report this commentThe Treasury thinks unemployment could be 6.3 million?!?
Could you kindly supply a link Frazer, that's the most apocalyptic vision yet heard. No doubt we're in for some real pain, but unemployment on that scale will have people marching on parliament.
Nigel Sedgwick
October 14th, 2008 12:09pm Report this commentBefore New Labour get there, I'd like to suggest a clear way of reducing inflation: revert from CPI to RPI. Put housing back into the equation and there would be a 'useful' negative influence on cost of living.
Best regards
Wily Trout
October 14th, 2008 12:57pm Report this commentSadly the link to today's inflation data http://www.statistics.gov.uk/StatBase/prep/868.asp) gives a message that the page cannot be found.
Wily Trout
October 14th, 2008 1:05pm Report this commentThe link to today's inflation data should be http://www.statistics.gov.uk/pdfdir/cpinr1008.pdf
If these stats were factored into real inflation returns, surely the BoE's response would have to be a dramatic rise in interest rates? I speak as somone who owes nothing and tries to save but I understand that, by modern standards, makes me a loser.
David C
October 14th, 2008 1:29pm Report this commentMark et al:
The treasury quotes the 6.3 million as a 'worse case scenario' according to the BBC. (The BBC also says the 'best case scenario' is not much good either.
So I'll have to consult the oracle to find out what that means.
Oy Mavis. Bring me a knife and a goat!)
Short the UK
October 14th, 2008 1:53pm Report this commentInflation - I'm worried about Deflation. The factories in Canary Wharf and Wall Street are bust. The make believe money has gone up in a puff of smoke. Trillons are being vapourised. The mirage of property prosperity has popped. The bubble has exploded. Cash is water in the desert of debt. Our economy is in serious trouble. How will we get growth going - devalue the pound is the economists cry. It will devalue as investors realise that this country is stoney broke. Roger Bootle is being nice and calling a 'shallow' depression. Sounds gentle. Bugger me - its going to get very rough.
Fraser Nelson
October 14th, 2008 2:20pm Report this commentDavid C, the BBC perhaps fell into the same mistake as I did. The 6.3 figure is a rogue figure listed in a column with "millions" on the header on the Treasury's latest update. The scary thing is that when we reach Q409 it could be the closest to the truth.
Fraser Nelson
October 14th, 2008 2:33pm Report this commentWily Trout, inflation is forecast to come straight back down in the spring. You should see the graph, it's a stunning drop - so this makes a further rate cut not just possible but likely. And then as Short the UK says, the prospect of deflation and all it involves (purchase postponement etc) will be a real worry.
seb
October 14th, 2008 2:34pm Report this commentThe number of 'economically inactive' people in the UK has been around eight million for some time. Most of those eight million are unemployed. The unacknowledged unemployed. If even five or six million of those were people who ought to be working but for the lack of a real economy, joblessness would be roughly equal to that of the depression years. It beggars belief that the Dear Leader gets the poll ratings he does. I'm amazed thirty people in the UK are prepared to vote for him, let alone thirty three per cent. It's clear why the Spinmeisters are back on their watch. When the dole queues stretch out into the mid-Atlantic, it's going to take quite an amazing ability to BS Brown's way out of that mess.
Hysteria
October 14th, 2008 8:30pm Report this comment@ Seb 2:34 - you maybe right - but all the people in the dole queue will be recatagorised and be part of the Obama/Brown client state so will vote them back in anyway.
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