Hopes of more rate cuts recede as oil pumps up inflation

Second-hand riches
Click to follow
The Independent Online

The cost of living is running at its highest rate for eight years, official figures revealed last week.

Soaring petrol prices lay behind the rise in inflation to 2.3 per cent in July, its highest since 1997, according to the Office for National Statistics.

Inflation has now overshot the 2 per cent target set by the Bank of England, dampening the likelihood of another cut in the Bank's base rate next month - for fear of stoking further price rises.

At 87.5p, the average price of a litre of petrol was responsible for more than half the July increase in inflation, which went up from 2 per cent in June.

The prices were "significantly worse than expected and will no doubt dampen hopes of further [short-term] cuts in interest rates", said Jonathan Loynes, chief UK econo- mist at the Capital Economics consultancy.

Many analysts believe that, with oil prices continuing to hover at very high levels, inflation could go up significantly over the next few months.

The danger of inflation lies in its erosion of the value of the pound in your pocket. When other factors, such as your salary and the returns on your savings, are not growing at the same pace as inflation, you in effect lose money since the "real" value of your cash is falling.

Many bank and building society savings accounts offer rates of return that, once inflation and tax are taken into account, leave savers with little real gain.

The sale of unwanted or unused goods through internet auction sites is giving a huge boost to consumer confidence, according to new research.

By putting anything from old vinyl records to second-hand dishwashers up for sale on the websites, the average UK household could make as much as £3,000, says a report from the Centre for Economics and Business Research (CEBR), an economics consultancy.

The CEBR expects more than £4bn of trading on the best-known site, eBay, to be conducted this year - equivalent to 1.3 per cent of the UK's total retail sales receipts.

The phenomenon has been dubbed "E-baynomics" by the report. Its impact on consumer confidence is likened to the effect of the surge in house prices between the late 1990s and 2004, and the building society demutualisations of the 1990s, which dropped huge windfalls into the pockets of consumers.

"With the arrival of auction sites like eBay, owners of second-hand goods now have a mechanism for advertising, gauging the interest of buyers, and maximising the price [they can get]," said Laura Phaff, a CEBR economist.

"If people realise that they have sellable goods sitting in their cupboards, it ought to increase consumer confidence just like any other unexpected boost to wealth."

It would, however, be difficult for the Government to track such a consumer confidence measure, the CEBR acknowledged.

Fight the fraudsters

Giving consumers free access to their credit record at least once a year would help combat identity theft, new research has suggested.

The proposal was made in a report from Professor Martin Gill, commissioned by credit-card provider Capital One. Professor Gill examined the lessons to be learnt from the United States in combating ID theft, which involves criminals pretending to be you in order to apply for credit and consumer goods in your name.

It currently costs £2 to order a copy of your record by post from one of the UK's three credit-reference agencies, which help lenders to assess your creditworthiness.

But cost isn't the only issue. Many people either don't know who to contact for a report, or can't be bothered to make the effort. Sending consumers a copy of their credit reference at least once a year would raise awareness and encourage them to keep a closer eye on their records.

Professor Gill also suggested that the agencies - Equifax, Experian and CallCredit - should share more data on fraud.

Anyone who falls victim to ID theft currently has to inform each agency to clear their name.

ID theft is one of the fastest-growing crimes in the UK. It cost UK banks £1.3bn last year, and while there is no financial hit to innocent victims, inconvenience is incurred in helping the police to clear up the mess and re-establishing a good credit record.

There were 130,000 cases of ID fraud in the UK in 2004, according to Cifas, a body set up by the consumer-credit industry to tackle financial crime - up by nearly a third on 2003.

Criminals build a picture of you by fraudulently accessing your bank and credit-card details, and other information such as your date of birth or passport number - often via burglary, computer hacking and bin-raiding.

They then apply for cards, goods and loans in your name, leaving you to pick up the bill.

Look after the pennies

Nearly £1bn in small change lies down the back of sofas or in jars in UK households, it emerged last week.

Nearly nine out of 10 people lose or neglect £10 in coins throughout their home every year, according to research from Jonathan Wren, the banking and finance staff recruiter.

We're even worse with foreign currency: on average, the equivalent of £20 is lying around.