DCSIMG

Comment: Old enemy inflation rears its ugly head again

Terry Murden

Terry Murden

  • by TERRY MURDEN
 

for a few weeks it looked as though the economic tide was turning. September gave us better news on inflation (the lowest for three years) and retail figures (showing the first signs of improvement). But the post-Olympic bubble has well and truly burst.

October produced a sharp spike in inflation, the 2.7 per cent figure being higher than most forecasts, and Scottish retail figures showed the biggest like-for-like fall since May 2011.

The data on both fronts will fail to excite retailers hoping for a pre-Christmas spending boom.

Although the experience of previous years shows consumers defying Christmas predictions, stores will be cautious about over-stocking and are likely to kick-start sales ahead of the festive season.

A worrying trend is the return of inflation which is expected to shoot above 3 per cent some time next year and possibly to 3.5 per cent by the summer.

The rise in inflation should force hard-pressed savers to shop around for some better deals or see the value of their money eroded even further. Moneysupermarket says that to beat inflation, basic rate taxpayers will need an account paying at least 3.39 per cent to benefit in real terms, increasing to 4.51 per cent for higher rate taxpayers, and 5.41 per cent for 50 per cent taxpayers.

That is easier said than done. For basic rate taxpayers there are only 11 accounts that beat inflation, all of them fixed-rate bonds. For higher rate taxpayers there are none.

Royal Mail losing the basket case tag

The transformation of Royal Mail from loss-making basket case to profitable concern ready for its transition into private hands is gathering pace. As the opening words to its interim report declare: the group’s financial performance continues to strengthen.

For the second successive year it has reported growth in first-half profits and all of the group’s main businesses are now profitable.

A key to this turnaround is, ironically, the internet. It was supposed to kill the business as consumers switched from letter post to e-mail and other electronic forms of communication.

Instead, it has been revitalised by the growth of online shopping which has swollen the parcels business. Two centres have been opened in Scotland just to handle this traffic.

The change of fortunes at Royal Mail also owes much to the investment in technology and the co-operation of the workforce to adapt to new working arrangements.

These have allowed Moya Greene, the chief executive, to put the business on a more consumer-focused footing and to build in those areas, such as parcels, with the greatest scope for growth.

First it was banks, now it’s the energy industry

The energy sector is in grave danger of following the banking industry along the path of shame.

Allegations that utilities have been rigging the wholesale markets have been compared to the manipulation of Libor, the inter-bank lending rate, by the banks. Barclays has already been fined for its part in the scandal and others will follow.

Now the energy companies face similar accusations of market abuse which, if proven, would add to the growing public distrust over pricing and transparency that has dogged the industry for some time.

 

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