Less to spend
THE bad news is the inflation rate — racing into double figures with no need for a photo-finish. The instructive news is that inflation has now got its nose in front of pay. The going rate is probably still in single figures. Calculations this week from the (union-sponsored) Labour Research Department put it at 8.7 per cent. That is based on settlements over the past 12 months, and no doubt the rate has been creeping up, but inflation has crept faster. As for the extras in the pay-cheques — overtime, bonuses and so on — they can scarcely be keeping pace. One new pay- ment has crept in: the high street banks, when they require their managers to move, are now having to compensate them for the fall in the value of their houses. Spending power is on the way down. That has been audible in the moans of distress from the shopkeepers and from some of their credi- tors, and is now reasserted in the figures for retail sales. Look for it next in a rise in personal bad debts to the banks and more defaults on mortgages. Poor profits and forecasts from big companies, especially those around the building business — Wimpey last week, P&O this — tell a compatible story. It is that there is no more need to unbounce the domestic economy. In spite of the inflation figure, I continue to look for an interest rate cut this year, and more next.
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