Following Tuesday's surge in US Producer Price inflation, yesterday, it was the turn of the UK to provide the latest instalment of the growing evidence that global inflation is rising sharply, and quickly becoming embedded, as opposed to central banks claims that it is merely “transitory”.
The ONS data shows that CPI, in the year to May, rose by 2.1%, compared to 1.5% in April, and 0.7% in March. On a month on month basis, CPI rose by 0.6% in May as against April, the same as the monthly change in April over March. In March, the increase over February was just 0.3%, whilst February over January was 0.1%, and January over December 2020 was actually negative 0.2%. That indicates that the pace of increase in inflation is quickening, and that is despite the never ending lockouts and lock down of the economy imposed by the government.
A look at the areas where prices rose most, shows that the effects of the lock downs are still imposing themselves, with the biggest rises in clothing, motor fuel, recreational goods (particularly games and recording media), and meals and drinks consumed out. Many of those are things that can be bought online, whilst motor fuel and eating out reflect the start of reopening, but in conditions where many workers in those areas are no longer available. There are a reported shortage of 180,000 workers in hospitality. More than 1 million workers are reported to have left Britain and returned to the EU, during the lockouts and lock down. Given the new conditions of Brexit, they will not be returning. Chickens have quickly come home to roost to the vulgar Brexiters like Tim Martin of Weatherspoons, who now find themselves having to pay 18% higher wages just to try to get staff. These higher costs, carrying through into lower profits, and higher prices, will simply make the UK even less competitive against the EU, and others, in the months to come.
By comparison, there was a large downward contribution from food and non-alcoholic beverages, where prices fell this year but rose a year ago, particularly for bread and cereals. But, globally, these food prices have been rising sharply, and that will inevitably feed through into UK food prices, in coming months. Again as a result of Brexit, the UK will face higher food prices, both because of higher costs importing from the EU, but also as a result of the lack of EU workers in British agriculture to bring in the fruit and vegetable crops. The cheap meat that might come in from Australia as a result of the new trade deal with Australia, seems wholly to the benefit of the latter, and detriment of Britain, whose beef and sheep farmers are likely to be destroyed by it in the same way that the Tory Brexit policy is now destroying the fishing industry. The UK-Australia trade deal is estimated to add just 0.02% to UK GDP, as a result of a 6% rise in UK exports to Australia. On the other hand, Australia is set to see its exports to the UK rise by over 80%.
The fact that in this trade deal, the UK has been so obviously screwed over by its former colony demonstrates just how Brexit has diminished the bargaining power of the UK in the world. Those who thought that Brexit was an opportunity to return to the golden days of the British Empire, will be sorely disappointed.
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