UK will have one of the highest inflation rates in the G20 this year

InglebyUTB

InglebyUTB

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Britain will have one of the highest inflation rates in the G20 this year but should narrowly avoid recession, the Organisation for Economic Co-operation and Development (OECD) has said in its latest set of forecasts.

The Paris-based OECD - a club of rich countries - said UK inflation will be higher in 2023 than nearly any G20 member save for Argentina and Turkey.

However, looking at its broader membership, the UK's inflation rate, while high, will be outpaced by a number of other countries, including Sweden and Iceland.

It warned that higher interest rates are likely to dampen economic growth and incomes in the coming months.

news.sky.com

UK to have one of highest inflation rates in G20 this year, new forecast shows

The latest update from the Paris-based body sees risks ahead from energy prices, which could leap substantially again ahead of the coming winter, and rising interest rates.
news.sky.com news.sky.com
 
I have been following thse issues for 45 years and the UK normally has an higher than average inflation rate amongst developed nations. I am still not sure why. We tend to let our currency devalue a bit more than some other countries, some blame it on a generous welfare system (I am not sure that is true any longer), others on a relative declining economy (and its been declining in relative times for over 120 years).
 
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I did not agree with the welfare spending argument, the "some" were usually right of centre economists like Milton Friedman who compared the UK with the USA - where for example unemployment benefit lasted 3 months then food stamps.

I know Germany was haunted by the hyper inflation of 1923 and those in control of the Deutchmark made sure the money supply was tightly controlled. In general the German population supported them to avoid any chance of a rerun of the Nazi era.

Britain was more like Italy, if the country was struggling to pay for its way in the World and wanted to bribe the local voters with giveaways it would devalue the currency by printing more and reducing local interest rates. A few years down the line inflation would be recorded, Barber boom of 1972/3 led to higher UK inflation by 1975. Possibly the many Government gifts in 2020/21 have helped to create the inflation of 2023.
 
Redwurzel said:
I have been following thse issues for 45 years and the UK normally has an higher than average inflation rate amongst developed nations. I am still not sure why. We tend to let our currency devalue a bit more than some other countries, some blame it on a generous welfare system (I am not sure that is true any longer), others on a relative declining economy (and its been declining in relative times for over 120 years).
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We don't have a generous welfare system, we have some of the worst benefits, especially the state pension
 
Personally, I don't really know what the UK does without causing pain, and despite Tory wails, it's a little beyond the BOE's control.

1. The UK - like the US - has a shortage of labour as a result of deliberate policy choices. People left the workforce for good post-Covid just as the UK cut off cheaper labour supply from the EU putting upward pressure on wages. But people don't want immigration in the UK or US, so it's not an option...

2. If we look at pure inflation and not core so that food and energy is included (chart attached), the picture looks even worse for the UK. This is because lower energy prices on global markets are not feeding into UK inflation because people have been shielded by the cap. Incidentally, that cap also adds to inflation since people have more to spend. But of course, this is a policy with wide support among the public.

3. Also in the raw inflation data is the cost of food. My alma mater conducted a study suggesting food prices in the UK are 33% higher due to Brexit because the UK simply imported labour (Britons don't want to pick fruit, that's clear) and various food stuffs. Let's not forget the huge proportion of grain that comes from Russia and Ukraine that is obviously very difficult to access and in reduced supply due to a proxy war that the UK is the biggest cheerleader of. But Britons want to continue the Ukraine policy and isn't going back to the EU anytime soon. Labour would never even dare mention an EEA deal.

4. Since Cameron and Osbourne, Britain's productivity has gone in one direction, down which very bluntly means fewer goods and services are produced at a higher cost per unit so the ability to grow without inflation is dramatically reduced. Productivity is low due to a lack of business investment, and why would business invest in a country that has become insular and looking to reduce trade and add barriers rather than the reverse?

5. Given the public opposition and government incompetence, the BoE has just one, blunt instrument to get inflation under control and that's to keep raising rates until the economy is nuked and people facing massively increased mortgage bills when they refinance.

Pretty bleak set of outcomes for the UK.
 
motownjunk said:
True we are genrally ranked 15th to 20th for welfare spending. We have not been above the average for "high income" countries since the very early 1970s. Whatever has caused historically high inflation rates in the UK I think we can safely say its not our welfare system.
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That’s true but it’s still not a “we never were”. Barely in my lifetime perhaps. But in my father’s. Thanks to the efforts of the Attlee government that all the centre right granddad sellouts (sorry, sensible realists) on here would dismiss as naive folly
 
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