We constantly hear about how the UK is an outlier in the West when it comes to inflation. While our CPI is running at 3.7%, prices are barely budging in other countries the US in particular. That's grist to the mill of the deflationists (whose cause we have enormous sympathy with).
But is it really so? Perhaps not.
In fact, according to Simon Ward at Henderson Global Investors, US inflation might not be so low after all. Recalculate it using the European Union's "harmonised index of consumer prices (HICP)" methodology and it turns out that US consumer price inflation is almost the same as UK consumer price inflation an annual 3.5% in April. US core inflation (excluding food and energy) would also be much higher using the European method 2% not 0.9%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
You can argue the toss on the methodology with this one but it is worth noting that on the same method, Eurozone CPI comes in at about 1.5% that's a significant difference. So why might inflation be more obvious and so very similar in the US and UK than in Europe?
Presumably because both of them have followed very similar monetary policies since the beginning of the financial crisis lots of QE (money printing) and the tolerance of weak currencies. Something for both the inflationists and the deflationists to ponder over.
-
Rightmove: Asking prices edge closer to record peakAsking prices have been driven up by the top-end of the market, Rightmove has found. But how does the situation look in your area?
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
