Bill Gleeson: Inflation may be rising from out of its grave

Nov 14 2007 by Bill Gleeson, Liverpool Daily Post

THE economy is in a double bind. On the one hand, Britain’s economic managers are struggling to prevent the credit crunch from plunging the country into recession.

One ominous sign is the way house prices are beginning to fall. Another is how the Chancellor has lowered his forecasts for economic growth next year. In addition, there are concerns that consumers will be in less festive mood this Christmas and are going to be more tight-fisted with the presents.

All in all, there are a lot of jittery people around, made so by the bad debt problems afflicting the housing market in America.

All of these factors, you would think, should make the Bank of England’s job of controlling inflation much easier. Yet, oddly, despite everything, we still face the threat of rising inflation, as yesterday’s figures show.

Oil prices have hovered around the $100 a barrel mark for the last two weeks. Just this week, the Office for National Statistics published figures that show the prices of both food and manufactured goods are rising faster than they have for many years. The cause of these inflationary pressures is the world’s inability to feed China and India’s voracious appetite for raw materials and commodities. One alarming example is the change in China’s diet, which is rapidly becoming westernised. They are eating a lot more pizza. This in turn stimulates demand for mozzarella, and consequently the price of the cheese has risen rapidly this year, which pushes up the price of pizzas in our country.

By historical standards, UK inflation remains low. For ten years now, economists have been saying inflation is dead, but for how much longer?

IT’S a year since Farepak went bust. People who had saved all year to afford a better Christmas for their families found themselves hugely out of pocket. It was a big blow to the credibility of the whole home savings market. How could any- body trust them again?

The fact is the industry, which includes Wirral-based Park Group, has worked hard to restore consumer confidence, though sales remain weak compared to previous years.

It remains strange, however, that Christmas savings are not given the same protection as money lodged in a bank account. We only need to look at the guarantees offered to Northern Rock savers to see the difference in the way they were treated.

Surely it’s time to recognise that Christ- mas savings customers deserve the same protection – perhaps more so than those who use mainstream financial services.

THE reports that one of the bidders for Jaguar and Land Rover would split the brands into two separate operations shouldn’t come as a huge surprise.

The fact is the future of the brands is very uncertain at the moment. Anything is possible.

The reports seem to confirm people’s worst fears that any new buyer would not respect the decades-old traditions associated with the brands, but instead seek ways to make the cars more cheaply.

A split would bode ill for Halewood. Staff at the plant may have thought that they were better placed to survive the uncertainties of a sale because both Land Rover and Jaguars are made there on a single production line. It’s one of the best examples of a flexible multi-vehicle production line in the world. The experts have suggested it would be too difficult to separate them in the short term.

But, if the latest reports are true, then perhaps that belief is wrong.

While the rest of Liverpool is celebrating Capital of Culture year, 2008 will be an anxious time for Halewood and its employees.