‘Inflation falls’ has been the eye-catching headline over the past few weeks. The big news was that inflation had fallen to a rate where it matched wage increases; but the higher interest rates are increasing the rate of borrowing, which particularly impacts mortgages. Meanwhile, the price of energy remains high. What of food?
Inflation is currently 7.8% according to official figures. Our measure of food inflation, based on the goods we are monitoring is 14.99%. The 14 items we began monitoring in May 2022 were £15.48 a year ago and £17.80 on Saturday, 24th September 2023.
However, the rate of inflation on food items is coming down. The graph shows how the gap between the prices a year ago is narrowing.
In May, the same goods which had cost £13.43 were costing £18.03; but what is noticeable about the graph is that, whilst in 2022 the trend was clearly upward, in 2023 we can see very clearly that the line is a lot straighter – prices are relatively stable. We are only comparing the period from May to September because we had no figures prior to that, which was when our monitoring started.
Calculating interest rates is relatively straightforward, but the decline in interest rates is not because prices are falling dramatically, it is because they are no longer rising.
As I have pointed out on a number of occasions, inflation is an average. It takes a number of goods and compares how much they cost from one year to the next. It is a crude measure in that it misses individual items that may have risen, whilst others may have fallen. It also misses the movement of individual goods over that year.
The table below shows the 22 goods we have monitored since 21st January. It shows the price on that day, our reference point, the price on 24th September, and the percentage increase or decrease.
It shows that there were seven items that have not changed at all since January. All these items are from Aldi. We might note that the German supermarket’s UK division reported profits of £178.7 million for 2022, an increase of 197% over the previous year.
This profit increase has been fuelled by the cost of living crisis, as their chief executive officer (Aldi UK and Ireland), Giles Hurley, acknowledged: “Britain is shopping very differently to how it did 18 months ago – fewer trips, more own-label products, and switching supermarkets in search of better value.”
Whilst seven items have not changed since January, only one item – cheese – has actually come down in price. Of the other 22 everyday items, plum tomatoes have risen 43.5%, skimmed milk 34.6%, beef burgers 30.6%, and tomato soup 24%. In other words, even if you can find bargains in Aldi compared to Tesco and Sainsbury’s, you cannot evade inflation and its effect on your shopping basket.
We have tended to concentrate on food inflation because, unlike rents and mortgages, or energy prices, it is relatively straightforward to monitor. Pick a shop and a few items and just note down their prices every week.
Much about the current cost of living crisis is obscured. Energy prices in particular are difficult to monitor because five households in the same street could be on entirely different providers and tariffs. Rent prices are dictated by the demands of landlords, who can still raise rents on a whim. Mortgage rates are linked to bank rates which, as we have seen, can rise rapidly based on a government policy of reducing inflation by reducing demand. That policy, incidentally, rarely works and just causes job losses — but, as the US Federal Reserve Chair, Jerome Powell, admitted last week, the so-called ‘soft landing’ in which inflation is brought down without massive job losses is looking unlikely.
“I’ve always thought that the soft landing was a plausible outcome, that there was a path to a soft landing,” he said. “Ultimately, this may be decided by factors that are outside of our control.” In other words, all the pain gets passed on to what they call ‘consumers’, which in plain English is ordinary people like you and me, on the basis of a failed economic theory which is as likely to completely destroy the economy as fix it.
This scenario — where rising wages are seen as bad for the economy, but low rates of inflation whilst millions are unemployed, is seen as good — tells us much about the policies being promoted by the establishment elite on both sides of the Atlantic.
Although prices are slowing down and unemployment remains stable, governments have no answer to the crisis that has engulfed them. Traditionally in such cases, they have allowed the economy to be destroyed by engaging in massively destructive wars. Whatever the pretext for sending more and more weapons to Ukraine, ultimately it may well be that our leaders decide that the destruction of parts of Eastern Europe matters far less in their minds than ensuring that their companies remain profitable and they, individually, continue to amass more and more wealth.
That 45p rise in the price of milk this year might be indicative of more than just an irritation to you as you do your weekly shop.
Socialist of many years. Former Labour member. Currently presenter of The Socialist Hour.