I joined Mike Graham this week to talk through the latest economic data, and there was plenty to get into: inflation back above 3%, sharply higher fuel prices, another fall in payroll employment and the growing squeeze on household budgets.
And sometimes a simple story tells you as much about the economy as the headline statistics.
Mike told me he had taken his son for lunch at a country pub near Bath. Two meals, water and a coffee came to £44.50.
He could afford it. But what about the family of four sitting behind him?
That became one of the themes of our conversation: after several years of rising prices, how much room do ordinary households actually have left to spend?
Watch the Full Conversation
Inflation Is Rising Again
The latest figures show inflation increased from 2.9% to 3.1% in August, with transport, particularly motor fuels, helping drive the increase.
Motor fuel prices were 23% higher than a year earlier.
There is an important point here that often gets misunderstood.
If inflation stays at 3%, prices have not stopped rising. They are still increasing by around 3% a year, on top of all the increases households have already absorbed.
That cumulative impact is what matters.
Inflation may be well below the levels reached during the worst of the cost-of-living crisis, but that does not mean prices have gone back down.
Higher Fuel Prices, Then Higher Interest Rates?
We also talked about the Bank of England and whether higher interest rates are really the answer to another bout of inflation driven by fuel and energy.
My concern is straightforward: putting UK interest rates up does not make global oil cheaper.
Higher rates can reduce demand elsewhere in the economy, but they also squeeze households through mortgages, borrowing costs and potentially rents.
That risks creating a double hit: higher fuel and energy costs, followed by higher borrowing costs in an attempt to tackle inflation partly being driven by those external pressures.
Seven Months of Job Losses
At the same time, the labour market is weakening.
The latest payroll figures showed another fall in August, leaving payroll employment 145,000 lower than a year earlier.
We have now seen seven consecutive months of year-on-year falls in payroll employment.
And some of the biggest losses have been in areas such as retail and hospitality, exactly the parts of the economy that feel it when households start cutting discretionary spending.
That brings us straight back to the pub.
When Families Stop Spending
£44.50 for two pub meals does not tell us everything about the British economy.
But it illustrates the pressure households are under.
When prices keep rising, people change their behaviour. They eat out less, postpone purchases, cut back on weekends away and look for cheaper alternatives.
Multiply those decisions across millions of households and businesses start feeling it.
Demand weakens. Recruitment slows. Hours get cut. Eventually, jobs can disappear.
That is why inflation and employment should not be viewed as completely separate stories.
The bigger question is becoming very simple: how much money do households actually have left after paying for the essentials?
And when fuel, food, housing and other everyday costs have all become more expensive, there is less left to spend elsewhere.
We covered all of this, plus public versus private-sector pay, energy policy and the outlook for interest rates, in my latest conversation with Mike Graham.
Watch the full discussion above.
✍️ Jamie Jenkins
Stats Jamie | Stats, Facts & Opinions
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Great piece Jamie. And of course, you’re absolutely correct. Prices rise all the time. It’s just how fast they rise.
We can’t stop costs. The cost is the cost in a free market. That’s why we need to do as much as we can with what we have. I completely agree.
The question for me is do we cut our cloth or just get more cloth! My view is the latter.
Cutting cloth only covers so much!! We definitely need more cloth!!
And the way we do that is the use of MONEY. We must use that money that presently sits unused.
Because we need to use money to reward us all then, hiving it off in Banks at home and abroad not contributing to our collective need is just wrong.
Not just wrong, it allows vast sums of money to be dormant, unspent, unused and idle that isn’t even taxed!
So not only is money withheld from our needs it’s not even taxed!!!
That’s why we are in this quagmire Jamie. A lack of turnover of money and an absence of tax of that unspent money.
If money were to be rotated millions of times a day, then more tax would be generated than if it was taxed just the once. So the obvious benefits come from it being SPENT.
It’s the systems inability to force SPENDING that keeps us oppressed.
But money is one thing. Value is another. I’m hoping that if money has to be SPENT each time it’s received a more sensible value of goods and services would result. But that’s a question for later.
First, we just need to understand tax.
All tax is triggered by SPENDING. As money is SPENT tax is triggered. For example, when employers SPEND on the wages and taxes of their employees. As well as SPENDING money itself.
We know that’s true because MONEY NOT SPENT triggers NO TAX. NONE.
So all taxation has to come from SPENDING. It’s a fact. Spending or having to spend is the trigger.
So for us we need others to SPEND so we get income and government need that spending for them to get sufficient tax for their needs a surplus not constant deficits.
It’s not a difficult concept to understand Jamie?
So the answer must be from more spending of the money that hitherto hasn’t been used! And that’s the money held in Bank accounts. On behalf of the minority who hold the vast majority of our much needed money. As that’s the only pot of money that presently is unspent.
At present we have an underfunded economy producing an underfunded government. Because most of our money is effectively withheld in those bank accounts.
What we get instead of freely spent money is indebted money leveraged by unelected banks for their benefit not ours. Not the majority.
That’s undemocratic unfair and wrong.
Earn as much as we can. But we have to spend it in full and fair exchange swapping money for others work production and effort.
It’s not rocket science Jamie, it’s cash flow.
It’s a three dimensional application of a two dimensional need. But critically we need a fourth dimensional time limit for that cycle. To ensure we all get sufficient money in time for us to pay our bills!
You can’t read that from two sided bookkeeping Jamie. You can’t run a governments economy by such a limited view. It’s not a household budget of, money in and money out. It has to come back around every single month and that’s the full cycle. It’s through a 4D viewfinder.