Tuesday, 13 September 2011
No beans and toasted
In hard times the sale of tinned foodstuffs tend to go up. In the past it has been used as a very useful indicator of the state of the economy. So the news today that Tata, one of Wales’s largest employers, is to stop producing tin plate for a week at their Trostre plant in Llanelli is worrying indeed.
Trostre is a tin plate manufacturing plant and in the last recession demand for canned goods went up. Now Tata say that at the moment demand has waned. So if people can’t even afford beans and shops are closing, even charity shops, times surely are hard.
Most worrying is that at the time the economy is slowing, prices are continuing to increase. The Office of National Statistics released figures this morning on inflation. The consumer prices index rose to 4.5% in August, up from 4.4% in July.
This was driven by the biggest annual rise in water and energy bills coupled with a surge in the cost of clothing and shoes.
The retail prices index, which includes housing costs and is used for m any pay negotiations and pension payments, increased to 5.2% from 5% in July.
These figures on inflation are over twice the 2% target set by the Bank of England. However it is unlikely that the Bank will raise interest rates to deal with these figures anytime soon, because of the perilous state of growth in the economy.
What is more likely is that they will resort to our old friend quantitative easing to put money into the economy.
So with wages not keeping up with price increases, unemployment on the way up there is unlikely to be much cheer in the homes of Wales anytime soon.
Now the great hope of the government was that the slack created by the cut in public expenditure and reduced consumer expenditure would result in a weaker pound and give exports a boost.
Well, for certain the pound has got weaker and expenditure has been slashed both public and consumer but the upside has not happened.
The UK's trade gap in goods has now crept above £8.9bn, offset by a healthy surplus of £4.5bn in services. The overall shortfall remained steady at £4.5bn but was up from £4bn in May and a recent low of £2.2bn in February. So the Chancellor’s dream of export led growth is shattered.
President Obama has recognized that to get the economy moving capital projects have to be started and jobs have to be created.
Lets hope that George Osborne takes note and perhaps we may all aspire to a tin of beans.