To think a recession is looming?

[GrannyBloomers]

I was quoted £2 a litre for heating oil. £1000 for 500 litres, a matter of weeks ago it was roughly a quarter of the price.

Energy bills set to be £3k per annum - potentially more when a new price cap comes in in October.

Diesel near me is 171p and rising.

I'm in a 3 bed semi, nothing special. I need at least 1500 litres of oil a year (it runs the hot water too). That's say £3k. No gas but electric. I'm doing ok with cutting use = £1.5k per annum.

That's 4.5k at todays prices for household power. What will it be in October - 6k, 9k more?

This is before other costs increase - food will go up when the cost of storing it (refridgeration etc uses energy) and transport also increase.

If all the average person's income is spent on rent/mortgage/ bills and energy, then there's no money to spend on anything else. No eating out, no leisure, no holidays.

Surely a huge recession will follow.

And what if a much higher proportion of people need benefits?

Just seen a headline that says energy prices are rising 54% faster than wages.

@Autumnwater

It may have been mentioned already. But why haven’t the government scrapped the NI hike there’s still time to do it before April 1st. Yes we need to raise money to clear off debt but is this seriously the best year to start doing it

Yep, it's an awful policy and even worse timing.

@BambinaJAS

You haven’t quoted a source for your 70% figure but a quick google suggests it’s not as high as that.

And the comments here are looking at too short a period of time; where we are now is not necessarily where we’ll be in a couple of months time, Some of the things contributing to the current cost of living crisis will ease over time (markets less jittery once the war is less acute, summer meaning people don’t use as much fuel) and others may be eased by government intervention.

Outside of this thread, I don’t see anyone around me cancelling Netflix/holidays/whatever, they’re just carrying on and seeing what happens. If anything, threads like this risk creating the problem we want to avoid by whipping up a panic.

You are correct in that what you’ve posted above are driving factors in an economic downturn but that doesn’t mean that’s what’s happening now.

Just seen a headline that says energy prices are rising 54% faster than wages.

That is a somewhat disingenuous headline, because the rate at which something is changing (the 54%) is different to its value in relation to something else, particularly when they have intrinsically different values to start with (ie wages are much higher than fuel costs).

Outside of this thread, I don’t see anyone around me cancelling Netflix/holidays/whatever, they’re just carrying on and seeing what happens

How do you know that? Nobody I know discusses the detail of their finances with me. I just know what we’re doing - and we’re cutting back because the rise in fuel costs has left us with no choice.

[quote BrightYellowDaffodil]****@BambinaJAS**

You haven’t quoted a source for your 70% figure but a quick google suggests it’s not as high as that.

And the comments here are looking at too short a period of time; where we are now is not necessarily where we’ll be in a couple of months time, Some of the things contributing to the current cost of living crisis will ease over time (markets less jittery once the war is less acute, summer meaning people don’t use as much fuel) and others may be eased by government intervention.

Outside of this thread, I don’t see anyone around me cancelling Netflix/holidays/whatever, they’re just carrying on and seeing what happens. If anything, threads like this risk creating the problem we want to avoid by whipping up a panic.

You are correct in that what you’ve posted above are driving factors in an economic downturn but that doesn’t mean that’s what’s happening now.[/quote]
Only just seen your question below and that @BambinaJAS has already replied.

I don't know what percentage of GDP is consumer and business related off the top of my head but it is a v significant amount.
Exactly as @Bambina has said, a higher percentage of take home salary needed for essentials leads to less discretionary spending. This impacts on all those businesses (we are extremely service based in the UK). They then either need to raise prices, potentially losing customers or cut back let people go, leading to higher levels of unemployment. Either strategy may cause the business to go bust. Businesses in uncertain times are unlikely to invest (this is the case despite Rishi's new investment scheme). The government are unlikely to increase public spending at present. It's clear the bank don't want to raise interest rates despite high inflation because they are aware of the consequences. Instead they keep attempting to reassure everyone that it is transient

Things will be worse rather than better in 'a couple of months time' and much worse by Autumn/ Winter when even more energy price rises impact everyone. There are also the tax increases from April which others have mentioned. We aren't seeing the full effects of the war yet, these will get worse, not better. The stock market is very overvalued at present so is likely to get worse than 'jittery' this year.

Personally, haven't asked any of my friends/ colleagues, etc if they are cutting back on their spending. I have had general conversations about the economy and people are certainly worried.
I don't think anyone is trying to whip up a panic, just stating things as they see them.

[quote BrightYellowDaffodil]@BambinaJAS

You haven’t quoted a source for your 70% figure but a quick google suggests it’s not as high as that.

And the comments here are looking at too short a period of time; where we are now is not necessarily where we’ll be in a couple of months time, Some of the things contributing to the current cost of living crisis will ease over time (markets less jittery once the war is less acute, summer meaning people don’t use as much fuel) and others may be eased by government intervention.

Outside of this thread, I don’t see anyone around me cancelling Netflix/holidays/whatever, they’re just carrying on and seeing what happens. If anything, threads like this risk creating the problem we want to avoid by whipping up a panic.

You are correct in that what you’ve posted above are driving factors in an economic downturn but that doesn’t mean that’s what’s happening now.[/quote]
I pay for my gas and electric by standing order, 12 level payments a year so it isn't any cheaper in the summer, obviously different if you are PAYG.

I have cancelled Sky, made my last payment 2 weeks ago. My pension increase isn't enough to cover my council tax increase let alone the increase in gas/electric/food.

I'm not in a panic but I've lived through recessions before and I want to try and stay ahead of it.

I never understand why people pre pay bills, earning companies interest instead of themselves

@Bringsexyback

I never understand why people pre pay bills, earning companies interest instead of themselves

Because there’s nowhere to put your money to get any interest worth having on it right now. And you pay more for your utilities if you don’t set up a direct debit.

@deadlanguage

Wage growth in Q4 2021 was over 4% so if you aren’t getting a pay rise this year then it is worth considering looking for a new job, but obviously that is an average across all sectors and it won’t be possible for all.

What do you think pensioners and the disabled should do? We definitely aren't getting 4%

My husband has been disabled for over 30 years, I know how hard it can be and I feel for families in that situation now.

@Bringsexyback

I never understand why people pre pay bills, earning companies interest instead of themselves

Because you can get a better deal, I'm in a deal that ends in April. I've been paying very low prices for gas and electric up to now but am facing a big jump.

"Services are the largest part of the economy – making up 81% of output in 2020"

"Household consumption is the largest element of expenditure across the economy, accounting for 59% of the total in 2021"

commonslibrary.parliament.uk/research-briefings/sn02787/

@PenStation

Thanks *@BambinaJAS* - makes sense

But this is a shocker for me…

Consumer spending drives about 70% of GDP.

Do you think that figure should be lower? Shouldn’t the nation be making more MRI scanners or other high value goods and services rather than relying on flogging one another coffee? It would make our economy more resilient surely?

Don’t mean to derail the thread but I’m interested.

40 years ago this was talked about. It was suggested at the time that we would all take in one another's washing, but as soon as a new washing machine was imported (from Japan) the country would be bankrupt. Consumer spending may drive 70% of GDP, but Netflix, Disney, Facebook, Amazon and Google spend which counts toward GDP sees most of the revenue siphoned off to tax havens - reducing that might be less damaging to UK employment.

@BrightYellowDaffodil "Some of the things contributing to the current cost of living crisis will ease over time (markets less jittery once the war is less acute, summer meaning people don’t use as much fuel) and others may be eased by government intervention."

The only tools available to governments to ease inflation are interest rates and reducing quantitative easing. Both of which pretty much guarantee a market correction and house prices falling. The BoE and the government know this so they will, in all likelihood, let inflation run, pretend like it's "transient" and keep spinning the narrative that things will get better in a year. It won't.

Uncontrolled inflation never "resolves itself". Eventually, the BoE will be forced to act, but only when forex markets start selling the sterling, and at that point, the interest rate rises will come hard and fast.

@ancientgran I have sympathy for those who can’t work or who are on a fixed income (state pension is going up 3% by the way) but I resent your implication that that includes ‘disabled people’ as a category. I have a physical disability and work as do many other people with disabilities.

[quote deadlanguage]@ancientgran I have sympathy for those who can’t work or who are on a fixed income (state pension is going up 3% by the way) but I resent your implication that that includes ‘disabled people’ as a category. I have a physical disability and work as do many other people with disabilities.[/quote]
State Pension is not a "fixed income"

It is index-linked to inflation, earnings or 2.5%

Problem is the current spike in inflation cannot be captured by the archaic way we uprate any kind of benefit in the UK.

Crunch time is not April 2022

It will be after October 2022 when the new cap goes up to £3,000 to £3,500

There will be no help with this. Sunak has practically telegraphed this with his comments. He also does not want to explore any kind of windfall tax (you think oil profits are high now just wait till later in 2022).

High gas prices are a different matter because gas is highly taxed (70%+ of the price), so he has an obvious lever to pull (partial VAT cut) to bring prices down. The reason for gas getting an intervention and not energy is because high has prices damage the country more (they make transporting all goods and services more expensive). It also "works" in the political sense because he can then tell people he is helping people on lower incomes who use car for commuting and not just the wealthy.

It is index-linked to inflation, earnings or 2.5%

The link to earnings has been suspended. I doubt it will ever be restored. Large pay increases will erode the value of pensions very quickly if it isn’t.

High gas prices are a different matter because gas is highly taxed (70%+ of the price), so he has an obvious lever to pull (partial VAT cut) to bring prices down. The reason for gas getting an intervention and not energy is because high has prices damage the country more (they make transporting all goods and services more expensive). It also "works" in the political sense because he can then tell people he is helping people on lower incomes who use car for commuting and not just the wealthy.

I assume this refers to petrol. We tend not to run vehicles on gas in this country.

The link to earnings has only been suspended for 2021/2.

Its not relevant now because the statistical quirk that produced the odd numbers for earnings was caused by the Pandemic lockdown. That will not be repeated again.

I expect a fairly large increase for pensioms next year due to the inflation link

And yes, its Petrol. I just prefer the American term.

I expect a fairly large increase for pensioms next year due to the inflation link

I don’t. The earnings link is unlikely to be restored and pensions are unlikely to see an increase above 2.5%. Any increase of any value is likely to be saved for 2024 so it hits just before the next general election as a bribe to retain the grey vote.

Depending on the outcome in Ukraine taking Russia out of the world economy and Ukraine unlikely to have a harvest this year (which many poorer countries rely on) could have a major domino effect causing a worldwide recession.

@Blossomtoes

I expect a fairly large increase for pensioms next year due to the inflation link

I don’t. The earnings link is unlikely to be restored and pensions are unlikely to see an increase above 2.5%. Any increase of any value is likely to be saved for 2024 so it hits just before the next general election as a bribe to retain the grey vote.

Inflation is projected to be 4% by the next uprating period (Sept 2022 CPI)

This means state pension gets uprated by that number 4% (at the minimum).

[quote deadlanguage]@ancientgran I have sympathy for those who can’t work or who are on a fixed income (state pension is going up 3% by the way) but I resent your implication that that includes ‘disabled people’ as a category. I have a physical disability and work as do many other people with disabilities.[/quote]
Well my husband is disabled and he hasn't worked in 30 years, he wasn't able to prior to retirement but even for some working people with disabilities I assume things like DLA (probably something else now) won't be going up either will it and actually lots of working people also rely on benefits.

40 years ago this was talked about. It was suggested at the time that we would all take in one another's washing, but as soon as a new washing machine was imported (from Japan) the country would be bankrupt. Anyone remember the Hoover advert, think it was late 60s. It was something like "Have you heard the news that's going around, hoover hoover have gone and found the washing machine that means the end of wash day. Washday just forget it.

Up to then it was really twin tubs which seemed to involve a fair amount of input. I remember my mother/grandmother/aunts all being enthralled at the idea of the automatic washing machine. What a journey, in the 1950s we were living in a terraced house with a wash house in the back yard. The women in the yard would have a washing rota, washing involved heating up the water in the tank by lighting a coal fire, then hand washing everything. The bit that always amazed me was having to cut off all the buttons from shirts so you could put them through the mangle to help get them dry. If you left the button on the mangle broke them. So wash day carried over to the next day when buttons were all sewed on and the ironing done. It was literally two full days to get the washing done. Less than 20 years later it was throw it in the automatic and walk away.

Inflation is projected to be 4% by the next uprating period (Sept 2022 CPI) This means state pension gets uprated by that number 4% (at the minimum).

Maybe. You clearly have far more faith in the government that made a manifesto promise that it would retain the triple lock than I have.