Hey guys, it's Sasha UK Inflation slows sharply to 4.6% says the financial times UK Inflation Falls Sharply to 4.6% says the BBC Risha Sunak said we have Haled inflation meeting the priority I set out in January and he reposted this clip of Jeremy Hunt declaring victory in January. The Prime Minister said that his number one pledge was to Har inflation and we have now delivered that pledge a whole month early. According to the UK government, the UK has now beaten inflation. It's over and it is time to pop the champagne and wildly celebrate.

Rishi Sunak has delivered on his pledge to half inflation. Except today's drop in inflation has absolutely nothing to do with anything Rishia Sunac all the UK government have done. It is an artificial drop. It is a masking where the data says that inflation is down, but the reality is unfortunately the complete opposite.

And as per usual, we're going to dive into the numbers so that I can explain why there is a massive problem. and I'm going to use data because I am not an insufferable politician with brain damage. So here is the monthly inflation data: Cpah was 6.3% last month and is now at 4.7% And where did this huge drop come from? Food in the UK is still in double digit inflation coming down a bit, but it's 10.1% This is insane because this is on top of food being 19% earlier in the year. The compounding effect over the last 2 years is Bonkers In the US inflation data yesterday, food at home, which is the equivalent metric was at 2.1% So in the UK inflation on food is only five times higher and is over 10% That sounds absolutely great, right? A good cause for celebration.

Then look at pretty much every other metric in this table. alcohol and tobacco hardly moved clothing and Footwear a little bit better health still very high communication also high at 8% Recreation and culture is up up from 6.2 to 6.6% Education up from 4.1 to 4.5% Services Overall have gone from 6.3 to 6.2% going absolutely nowhere. Incredibly sticky. In fact, the only reason the inflation data looks good today is because of this one line housing and household services.

This has dropped from 5.7% to 1.9% So what exactly dropped inside it? Let's look at the data in a bit more detail in table 12 of the data behind this report, you can see that inflation overall fell 1.6% from September to October and 1.2% Almost all of that came from housing water, electricity, gas, and other fuels. So let's go to table 8 and scroll down to section 4, which is that particular section that has caused inflation to go down and you can clearly see that there is this huge drop in 4.5 electricity, gas, and other fuels. Electricity is down 15.6% year onye it was up 6 6.7% last month. in September that's a huge drop and gas is down 31% and it was up 1.7% last month.

So the only reason that inflation looks so good this month is because Off Gem reduced the price cap in October and immediately that drop flows into the inflation data. Which is pretty funny because most people haven't even paid their bill for October yet. The money has not departed people's bank accounts and this is actually a very important point because the way that inflation is measured in the UK is different for different categories, with some categories like food prices are compared on a specific price of goods in the supermarket, the price at which people are actively buying those goods every single day, where money is being exchanged. So the data you have in inflation is based off what people actually pay at the till, but with energy, the inflation measure is not based on the actual amounts people pay, it is not based on the money leaving people's bank accounts and going to the company to pay for the energy is based on the rate rates for electricity and gas changing and here is why that is really important: The price cap reduction, as me of the average UK household will now have an energy bill of 1,834 compared to 1,976 in September.

That's 42 a year less but 12 months ago. From October 2022 to March 2023, the UK government paid 400 lounds towards everyone's energy bills automatically to reduce the pain when the prices suddenly went very high this winter, the government is not paying anything. When they did pay that money last winter, it was not taken out of the inflation data, so inflation data was calculated on the energy rates without accounting for the 400 that the government was subsidizing. You can see this in older versions of the same Excel sheet.

Here, you can see that the energy inflation actually went up last October when those payments started, although the actual payments went down. This was also the month when the UK government introduced the 25,000 energy price guarantee. Without that guarantee, the price cap would have been up at 35,000 So the 400 was paid in installments of 66 and 67 over a period of 6 months. The average Energy bill went up by only 44 when the price cap changed.

So the net monthly payments after you account for the government's subsidy 12 months ago were lower, but that's not how it came through in inflation data. The reality is that this winter inflation is comparing the 1834 price Gap to the 25,000 energy price guarantee in October last year. And if you do, the numbers 1834 is 27% less than 25,000 which is what we saw in the Excel as the year- on-year drops in Energy prices. The reality though, is that the 400 subsidy last year was spread over only 6 months, so you essentially got double the benefit of that 400 when you're comparing annual numbers.

The simple truth is that people are now paying more for their energy bill B s right now than they did 12 months ago. In real terms in terms of money leaving people's bank accounts because there is no subsidy, but the inflation data says that there's been a huge drop and Rishi Sunak is celebrating this accounting trick. But going back to inflation data, the number you should be concerned by really is O the number that nobody's talking about. the owner occupies Cost: These have gone from 5.0 to 5.4% in the last month and for the first time in this inflation, Spike O is now higher than the rate of inflation.

So now O is pulling the overall inflation number upwards for the first time. This is the start of a really big problem. Here are the detailed numbers for owner occupi Cost: You can see that rentals are staying pretty flat at 6.3% Rentals are probably going to take a little bit longer than mortgages to come through in this, but owner occupier costs are accelerating. They're not just going up.

they are accelerating. This is a massive M problem. Look, they were slowly creeping up in Spring 0.1 or 0.2% per month. Then it was going up a bit more and a bit more.

and in the last month it's gone from 5 to 5.4% In just one month, you can see the same data on this chart. it's the black line and you can see how it is trending further upwards. The thing is, this line is only just starting going up and it's going to get worse from here. How do we know Well Because most people in the UK have a fixed time mortgage with a fixed rate of 2 to 5 years.

When that fixed rate ends, you suddenly have to start paying a lot more money every month. And everyone who does have a mortgage which is about onethird of the country is going to see their monthly payments go up a lot because most people were taking out their mortgages when interest rates were at 0% In the next 18 months, a huge number of people in the UK are going to come off their fixed term mortgages and in many cases monthly payments for those people will be going up between 50 and 100% I Did the analysis of when all of this is going to happen Based on data from very Ious different government and Bank of England and other sources and the answer is we are right at the start right now. So when all of these people's mortgages come off those fixed term rates and people start having to pay 50 to 100% more in monthly payments that owner occupies, housing cost number is going to go a heck of a lot higher than 5.4% We already know this because those mortgages already exist, they are already running, they're not going anywhere, and we know that their fixed term rates are going to and we even roughly know when they are going to end. This is not a supposition.

it is a train full of excrement that is slowly moving towards the station and we can already smell it even though it hasn't arrived yet. Wages continue running very hot in the UK and it's not surprising energy costs are going up a lot. despite whatever the official data is saying, food is still going up at over 10% year on year. Remember, this is while the government is celebrating achieving something.

People are struggling to pay for the most basic things and wages are now running significantly ahead of the inflation number. This is a big problem because Services inflation is also running ahead of the average. and obviously Services inflation is very strongly linked to wages because the primary cost there is Wages. Wages are going up because of inflation and inflation is going up because of wages.

You see the problem, right? This is the wage price spiral that the United States was very lucky to avoid. But it is a very real and a very serious problem that is happening in the UK. Right now, the job market in the UK remains very tight. This is also a problem because strong employment, while there is a wage price spiral is a bit like pouring gasoline onto a big fire.

Richie Sunak is out there celebrating, but the movement in wholesale Energy prices globally has absolutely nothing to do with him or the UK government or anything that the Bank of England have done. There is no policy or action that they did that caused this to happen. It's just happened to happen this year while Rishi has been in office and now he is busy doing a victory lab telling everyone that he has achieved something. While the underlying numbers in the inflation report are dire, so what's going to happen in the next few months when the owner occupier numbers begin pulling the overall number up? what happens when high wage growth means that Services inflation is sticky will rishu thato and blame himself on Twitter for up and celebrating too early like a three-year-old who can't control his impulses.

If you look at the underlying data, the situation is getting worse while everyone is playing this pretend game and the media isn't Cahoots with a Muppets Show in the government. I Didn't see a single mass media publication analyze the data that came out this morning and point out these massive problems today and you've got to ask yourself the question: why is that? I Do look forward to when this mortgage crisis translates into a second wave of inflation problems because we already know it's coming. We can see it coming in the data because I can absolutely guarantee you that the UK government will blame everybody but themselves blame everybody but their own inaction and incompetence. And I can guarantee you that they will say nobody could have seen it coming.

It just appeared out of the blue and was absolutely impossible to see from a mile away. But do you think Risha gives a no? He does not because by the time that problem turns up, the likelihood is he will be kicked out and replaced by yet another prime minister. Maybe he'll lose the election, maybe it will happen before then and he'll be going around giving speeches to bank around the world for 500k a pop because neither Rishi Sunak nor the rest of those clowns in the UK government actually give a about doing the right thing or fixing problems. The only thing that those self-obsessed ass wives care about is their personal brand and self-enrichment And the reason I am so enraged and appalled by this is because they could have done something.

If they did care, they would be taking urgent action now to try and avoid the mortgage crisis. They would have been doing it through the whole of this year. They will be taking urgent action on housing. They will be stimulating the UK economy to reduce Reliance on food and other sectors on Imports in the long term because that's going to help as well.

None of these clowns care about the long term. So here we are. Remember to pop the champagne in the fridge and celebrate because inflation is down. Congratulations Rishy, You did it by doing absolutely nothing.