Wednesday, June 21, 2023

Boiling a frog: Higher prices the norm

Boiling a frog apologue has the frog frog put into lukewarm water and as the temperature increases the fog doesn’t notice that when the water boils the frog won’t survive. “It’s unlikely that prices will return to where they were.” When a rocketing commodity price drops by a few pence the relief consumers feel at a minimal saving engenders acceptance that the previous cheaper base cost will not reoccur.

Socialists are careful about making  predictions as to what a future socialist society will exactly be like. However, some things are self evident. There won’t be such a thing as inflation. Why? Because it will be a money-free society with goods and services produced for the common good, not for profit. There won’t be people being driven to despair because they can’t afford their rent, their mortgages, their energy bills or any other basic necessity of life which under capitalism is ‘can’t pay, don’t get.’

Grocery inflation in the UK has started to ease as two separate surveys suggest that food-price growth may have passed its peak, Bloomberg reported on Tuesday.

Food inflation in the country fell for the third consecutive month in June but still remains at 16.5%, down from 17.2% the previous month, according to data from market-research company Kantar.

Inflation stands at its sixth-highest level since the financial crisis in 2008, according to Kantar. Eggs, cooking sauces and frozen potato products saw the biggest price rises.

Another study, conducted by Lloyds Bank, said food-production costs in the UK declined for the first time in May since 2016.

Grocery-price growth reached 19.1% in April, which was the highest rate in more than 45 years, according to the Office for National Statistics (ONS).

Bank of England Governor Andrew Bailey earlier warned that the easing of inflation could take longer than expected.

The ongoing squeeze is clearly weighing on the nation’s mind,” head of retail and consumer insight at Kantar, Fraser McKevitt, said. “Of the top five financial worries that consumers have, rising grocery prices is the only one that they are more concerned about now than at the start of this year.”

An index tracking costs for food and drink producers fell for the first time in more than seven years, a Lloyds’ survey showed. However, “it will still take some time before we see the benefit in terms of shelf prices,” according to Annabel Finlay, managing director of food, drink and leisure at Lloyds Bank Commercial Banking.

This is, in part, due to the long-term nature of contracts between the manufacturers and retailers, as well as the broader segments of the production chain,” she added.

Earlier, UK officials reportedly met with supermarket bosses to negotiate price cuts, reassuring them that any scheme to help bring down food prices for consumers would be voluntary.

Last week Ken Murphy, CEO of Britain’s biggest supermarket chain Tesco, pointed to some signs of cooling grocery inflation after the company cut prices on bread, pasta and broccoli, but admitted that “it’s unlikely that prices will return to where they were.”’

The UK will have one of the highest inflation rates of any major developed economy this year, the Organization for Economic Co-operation and Development (OECD) reported on Wednesday.

According to the forecast, British inflation, which only recently fell to single digits for the first time since last summer, will be higher in 2023 than nearly any G20 member except Argentina and Türkiye.

Although headline inflation in the UK declined to 8.7% in April from 10.1% in March amid cooling energy prices, food inflation has been stubbornly high. Grocery price growth reached 19.1% in April, which is the highest rate in more than 45 years, according to the Office for National Statistics.

The OECD predicted that even as Britain is expected to narrowly avoid a recession in 2023, higher interest rates are likely to dent economic growth and incomes in the coming months.

"The high interest burden on public debt and the recent drop in average debt maturity leave the public finances exposed to movements in bond yields," the OECD said in its Economic Outlook.

The Paris-based organization expects the UK’s economy to grow by 0.3% this year and by 1% in 2024. It noted, however, that the forecast includes "significant risks."

Renewed increases in wholesale energy prices will “further squeeze real incomes given the United Kingdom's high dependence on natural gas. Faster-than-expected resolution of uncertainty regarding future trade relationships is an upside risk,” the forecast warned.

Responding to the OECD data, UK Chancellor Jeremy Hunt admitted that inflation was still “too high,” adding that “we must stick relentlessly to our plan to halve it this year. That is the only long-term way to grow the economy and ease the cost-of-living pressures on families.”

The inflation rate in Britain should average 6.9% by the end of the year, the report concluded.’


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