Unexplained item in the inflation area
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
2024 is supposed to be a year when inflation comes down and the Bank of England looks to cut interest rates. But new data from the Office for National Statistics shows that inflation has risen again in the UK.
The consumer price index, the main measure of inflation, was 4 per cent in December, up from 3.9 per cent in November, according to the ONS. This is the first time that inflation has risen in the UK since February 2023. The consensus among economists was that inflation would fall to 3.8 per cent, according to a poll compiled by Reuters.
The ONS said that the largest upward driver of the change in inflation was alcohol and tobacco. This included the impact of new government taxes on smoking. Food and non-alcoholic drinks were the biggest downward drivers. The core rate of inflation, which strips out items subject to short-term fluctuations such as energy and food, stayed at 5.1 per cent in December, the same as November, which is also a disappointing outcome.
Jeremy Hunt, the chancellor, has responded this morning by saying that inflation is subject to monthly fluctuations and that the longer-term trend is down. That is a fair point…
You can see that downward trend in the graph below from the ONS. This graph tracks the consumer price index (CPI), as well as CPIH, which is CPI including the costs of owning, maintaining and living in a house (such as mortgages), as well as housing costs on their own…
Here is some of the reaction to the inflation data…
That last post by Simon French, chief economist at Panmure Gordon, highlights how the new data will dampen any expectations that the Bank of England could cut interest rates as soon as this spring. The base rate of interest stands at 5.25 per cent in the UK. The Bank’s monetary policy committee will meet again on February 1 for their next vote on what interest rates should be.
You can read the ONS’s report on inflation in full here
Podcast…
Thanks to all Off to Lunch readers who have got in touch about the latest episode of our Business Leader podcast. We have had more feedback about this episode than any we have done before. The feedback is all about how fascinating Tom Beahon is and the company he has built with this brother.
If you haven’t listened yet, I highly recommend it. Tom and his brother Phil have built Castore into a UK sportswear brand that is worth more than £950 million and is taking on global giants like Nike and Adidas. The episode is about how Tom and his brother founded, built and scaled-up Castore, including the challenges they have faced along the way as the business has got bigger and bigger.
You can listen to the episode via Substack here, Apple here and Spotify here
Other stories that matter…
1. Shares in Superdry have fallen another 8 per cent today after Sky News reported that the fashion retailer had brought in accountancy firm PWC to advise the company on its finances. Superdry warned before Christmas that profits would be lower than expected due to a fall in sales. The retail expert Ian Shepherd has written an analysis about the challenges facing Superdry in his excellent Moving Tribes newsletter here. You can see the Sky News story on Superdry here
2. On a more upbeat note, the family-owned supermarket chain Booths, nicknamed the “Waitrose of the North”, has reported record sales for the vital festive period. Booths said like-for-like sales rose 8.7 per cent year-on-year in the three weeks to January 6. More here
3. There is an interesting column from Stephen Bush in the Financial Times about how the UK has built a world-leading video games industry and that politicians should celebrate it if they want the economy to grow faster. “What the UK really needs is growth, full stop,” he writes. “Part of how it might get there is a political class which learns to like the things the country does well, rather than the things it feels it ‘ought’ to do well, or wishing that the things it did well were older, more macho or involved more heavy machinery.” You can find the column here
4. Is the self-checkout about to disappear from shops? The technology website Gizmodo thinks so. “So far, the grand experiment in robot cashiers is an abject failure,” it says. Consumers hate them and retailers have found they lead to a rise in thefts, according to the analysis. You can read more here
5. Starting your day with a “brain dump” of ideas is key to a productive day, according to an analysis by Lifehacker. You can read more here
And finally…
For All Mankind has just finished its fourth series on Apple TV+. The drama imagines what would have happened if Russia had beaten the US to landing a man on the moon in the 1960s. The excellent technology newsletter Faster, Please! (of which Rishi Sunak is a reader) has written about why the show is so good and how it accurately depicts the drivers behind technological progress. The show is a great “what if” for those interested in alternative histories. Without giving away any spoilers, the consequence of Russia winning the race to the moon is that the US ups its ambitions for space travel. This leads to NASA making rapid technological advancements that result in the internet, electric cars and nuclear fusion emerging much earlier. You can read Faster, Please! here and find out more about For All Mankind here
Thanks for reading. If you enjoy Off to Lunch then please share it with others and spread the word. If this newsletter was shared with you then please sign-up below to get Off to Lunch sent directly to your inbox
Best
Graham