Inflation at its highest for 30 years
Britain’s cost of living crisis worsened in December after inflation jumped to 5.4% – its highest level in almost 30 years – driven by the higher cost of clothes, food and footwear.
Heaping further pressure on Bank of England policymakers to raise interest rates when they meet next month, the price of furniture and eating out also increased as shortages of staff pushed up wage costs and hold-ups at UK ports hiked the cost of imports.
The Bank expects the consumer prices index (CPI) to rise to 6% by April, while some analysts have forecast it could hit 7% unless the government decides to pump billions of pounds into the energy sector to cap spiralling heating costs.
CPI is of course only one specific measure of inflation. The real cost of living on a budget has recently been exposed on Twitter by Jack Monroe, a food writer, journalist and activist known for campaigning on poverty issues, particularly hunger relief.
In a fascinating Twitter thread* she highlighted:
Over the last year, pasta, rice and canned spaghetti have increased in price by 141%, 344% and 169% respectively
Other staple items, baked beans, bread, apples and mushrooms all high double digit increases
While at the same time, the luxury deal “Dine in for £10” has been that price for nearly a decade
If that price had risen by the same as the essential items, it would now cost £34.40
* Read the full post here. Jack Monroe on Twitter
Before this, the only positive sign for the chancellor, Rishi Sunak, who has come under intense pressure to provide funds for low income families to cope with rising costs, was that the Office for National Statistics reported a downward trend in the monthly rise in CPI. It increased by 0.5% in December, down from 0.7% in November and 1.1% in October.
Expect things to change on the back of Jack’s tweet as this as it has been picked up by the media and she has been on every programme from BBC News, Lorraine, rip Off Britain and GMB. The ONS have now asked to meet with her…watch this space.
Plan B measures hit hard and oil prices at a seven year high
Plan B measures hit retailers by more than expected in December as official figures today showed sales volumes slumped 3.7%. Clothing retailers and department stores were among the worst affected, with this week’s headline number from the Office for National Statistics much worse than the 0.6% decline forecast.
City traders, meanwhile, face a difficult end to the week after sentiment was hit by a late sell-off on Wall Street and Netflix shares fell more than 20% in after-hours trading due to disappointing subscriber numbers. The streaming giant's shares slid 20% after Wall Street's closing bell, having revealed it expects to add 2.5 million new paying subscribers in the current quarter compared with four million last year.
Tech and high growth stocks on both sides of the Atlantic are vulnerable to US rate hike expectations as their present values are built around future cash flows. The Nasdaq is at a three-month low and the S&P 500 more than 6% lower so far this year amid other disappointing earnings updates.
The UK stock market has been much more resilient and continues to be in positive territory for 2022, but the margin is narrowing after the FTSE 100 index fell 57.23 points to 7527.78.
Fears that Russia could be about to invade Ukraine added to London's risk averse mood, with commodity stocks including Anglo American down 2%.
Oil prices recently climbed to their highest since 2014 as investors worried about global political tensions involving major producers such as the United Arab Emirates and Russia that could exacerbate the already tight supply outlook. BP shares retreated 5p to 384.15p after higher-than-expected crude inventories sent the Brent price down 2% towards $86 a barrel.
Pizza buy now pay later raises debt concerns
Lastly, consumer finance company Zilch is getting flak for trying to encourage U.K. consumers to use buy now, pay later (BNPL) plans to buy cheap supermarket pizzas and other treats that fall outside the typical definition of BNPL purchases, the Financial Times reported on Thursday (Jan. 20).
Zilch virtual cards are accepted at thousands of U.K. retailers, including grocery stores, and allow users to pay for one-fourth of their purchase upfront and spread the rest of the payments across six weeks, according to the report.
Critics say using BNPL for anything but larger purchases will increase personal debt for account holders, the report stated, but Zilch defended the ads and the message behind them.
I feel however, that as long as they stick with the approved list of retailers, where the interest rate is 0% instead of using off panel retailers at an APR of 11.5%, then it is no different to signing up to pay via Klarna which I have done for bigger items, and the reality is that while Deliveroo is on the list (hence the pizza comment) most people will use it for the bigger purchases or to earn the cashback offers.
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