The UK consumer is starting the new year with petrol prices marching toward record highs, public austerity, and now a massive train fare increase. Shield your eyes ahead of the onrushing data.
Yesterday, I returned to work here in London for my first work day of 2012 after having spent the holidays abroad. I started my journey at the ticket window at my local train station, where I was shocked to hear that my monthly train pass renewal would cost me an extra ten percent over its cost the month before. Ten percent!
Train travel in the UK is already very expensive by international standards and millions in the UK are dependent on it for their daily commutes. Train fares are inevitably adjusted higher nearly every year, and this year’s increases include a whopping ten percent increase in the country’s busiest and most expensive London area. This in a country already suffering recessionary risks from weak internal and external demand, public austerity and petrol prices that are within reach of the 2008 highs. The demand numbers are likely to turn very ugly, though mild weather this month might make things look better for a time relative to last year’s deep-freeze.
To look at UK spending power in this economy, we took the ratio of earnings to inflation over the last 12 years, which improved smartly and floated the “average” consumer’s boat (we’d like to know how the median consumer fared during the go-go credit bubble days, but that requires a better data series from the UK national statistics office). But note how earning/spending power effectively peaked just before the global financial crisis and, after a few zany data points caused by collapsing commodity and other prices in late 2008 and part of 2009, has been on a brutal decline ever since that continues into the latest data points. This is a scary trend and does not bode well for the UK economy – aggravated most recently by huge increases in train fares and the promise of more austerity in the pipeline if the government ever wants to balance its budget, where the deficit continues to yawn wider than even in the troubled EMU countries. It will inevitably also lead to more money printing from the BoE and the risk that the pound continues to suffer.
For further reading, this article from the Telegraph discusses the fare rises and suggests that another set of rises may be set within the year for certain fare types. And this article from The Daily Mail discusses the shocking percentage of income that many commuters already pay for train fare, percentages that will increase further and draw from demand for other products and services.
Yesterday, I returned to work here in London for my first work day of 2012 after having spent the holidays abroad. I started my journey at the ticket window at my local train station, where I was shocked to hear that my monthly train pass renewal would cost me an extra ten percent over its cost the month before. Ten percent!
Train travel in the UK is already very expensive by international standards and millions in the UK are dependent on it for their daily commutes. Train fares are inevitably adjusted higher nearly every year, and this year’s increases include a whopping ten percent increase in the country’s busiest and most expensive London area. This in a country already suffering recessionary risks from weak internal and external demand, public austerity and petrol prices that are within reach of the 2008 highs. The demand numbers are likely to turn very ugly, though mild weather this month might make things look better for a time relative to last year’s deep-freeze.
To look at UK spending power in this economy, we took the ratio of earnings to inflation over the last 12 years, which improved smartly and floated the “average” consumer’s boat (we’d like to know how the median consumer fared during the go-go credit bubble days, but that requires a better data series from the UK national statistics office). But note how earning/spending power effectively peaked just before the global financial crisis and, after a few zany data points caused by collapsing commodity and other prices in late 2008 and part of 2009, has been on a brutal decline ever since that continues into the latest data points. This is a scary trend and does not bode well for the UK economy – aggravated most recently by huge increases in train fares and the promise of more austerity in the pipeline if the government ever wants to balance its budget, where the deficit continues to yawn wider than even in the troubled EMU countries. It will inevitably also lead to more money printing from the BoE and the risk that the pound continues to suffer.
For further reading, this article from the Telegraph discusses the fare rises and suggests that another set of rises may be set within the year for certain fare types. And this article from The Daily Mail discusses the shocking percentage of income that many commuters already pay for train fare, percentages that will increase further and draw from demand for other products and services.