Lockdown gaming fuels rise in UK inflation rate

Japanese games giant Nintendo’s profits surged during the lockdown. (Reuters)
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Updated 15 July 2020

Lockdown gaming fuels rise in UK inflation rate

  • Demand spike puts games in bestseller charts despite global console shortages

LONDON: British inflation rose unexpectedly last month, spurred by rising prices for in-demand computer consoles during the coronavirus lockdown, official data showed on Wednesday.

Consumer price inflation increased to 0.6 percent in June from May’s four-year low of 0.5 percent, pushed up also by the lack of traditional summer clothing sales last month after retailers slashed prices during the lockdown earlier in the year.

The average forecast in a Reuters poll of economists was for the rate to fall to 0.4 percent. Only a few had predicted an increase.

“June’s inflation figures are slightly above expectations but there remains abundant spare capacity in the economy,” said Debapratim De, senior economist at Deloitte.

“This should maintain a downward pressure on inflation, which could fall further, especially if there is a spike in unemployment later this year.”

Data published on Tuesday showed gross domestic product grew by a slower-than-expected 1.8 percent in May from April, when it slumped by 20 percent. The government’s budget forecasters said the economy could shrink by as a much as 14.3 percent this year.

An emergency cut to the VAT sales tax rate for hospitality and tourism, which took effect on Wednesday, is also likely to exert downward pressure on inflation.

Economists say inflation running well below the Bank of England’s 2 percent target leaves it under no pressure to rethink its huge stimulus push.

The coronavirus outbreak’s impact on supply chains led to shortages of game consoles around the world, just as demand spiked from people isolating at home.

In May, the Japanese computer games giant Nintendo reported a surge in profits in the first three months of the year, when many countries first entered lockdown.

“It is possible that prices have been influenced by the coronavirus lockdown changing the timing of demand and the availability of some items, particularly consoles,” the ONS said in a statement.

“However, it is equally likely to be a result of the computer games in the bestseller charts.”

Clothing and footwear prices almost held steady in June, a month which usually sees sales promotions.

The ONS said 17 percent of the items used to compile the CPI were unavailable to consumers in June because of the lockdown.

Core inflation, which excludes typically volatile prices, rose to 1.4 percent from May’s 1.2 percent.


Turkey on brink of recession as economy collapses

Updated 17 min 24 sec ago

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.