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COSTS AND PRICES

WIRRAL GRAMMAR SCHOOL FOR BOYS. COSTS AND PRICES. TARGET 2.0 TEAM. PRESENTED BY:. EDWARD KENNY. Wirral Grammar School. This Section Covers:. COSTS AND PRICES. PRESENTED BY: EDWARD KENNY – COSTS AND PRICES LUKE JONES – DEMAND

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COSTS AND PRICES

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  1. WIRRAL GRAMMAR SCHOOL FOR BOYS COSTS AND PRICES TARGET 2.0TEAM PRESENTED BY: • EDWARD KENNY Wirral Grammar School • This Section Covers: COSTS AND PRICES PRESENTED BY: EDWARD KENNY – COSTS AND PRICES LUKE JONES – DEMAND DAVID HULSE – MONEY AND FINANCIAL MARKETS SCOTT WATSON – LABOUR MARKET • Oil Prices • Gas Prices • Food Prices • VAT • CPI • Producer Prices DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  2. Oil price hits six-month high of $83.45 Oil Prices Wirral Grammar School • “Oil price to continue to rise” (Ali Al-Nuami; 01/11/10) COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  3. Gas prices • 2008 – 50% increase • 7% price rise pending in January • 25% cost increase Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  4. Food prices Wheat prices soar causing price spike scare Wirral Grammar School COSTS AND PRICES • Recent sharp rises in food prices do not point to a repeat of the food price spike in 2007-8 (UN's Food and Agriculture Organization; 24/09/10) DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  5. VAT Rise in VAT in Jan 2011 of 2.5% from 17.5% to 20% Direct inflationary pressure on the economy Wirral Grammar School COSTS AND PRICES 1991 CPI Great Britain DEMAND Last time VAT was increased it was only a short term increase It only lasted four months. MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  6. Causes of fluctuation Recession Compare with RPI House price changes CPI Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  7. Producer Prices Output price inflation 4.4 per cent in September. Input price annual inflation rose 9.5 per cent in September compared to a rise of 8.7 per cent in August. Month on month the input prices up 0.3 per cent between August and September. Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  8. DEMAND Summary PRESENTED BY: Energy Prices rising causing inflationary pressure Food prices increasing also causing inflationary pressure CPI stabilising above 2.0% target Input prices stabilising and so are output prices Therefore on the whole, hold interest rates with a scope to increase • LUKE JONES Wirral Grammar School • This Section Covers: • Property Market • GDP • Consumer Spending • Exports Inflationary Pressures COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  9. Property Market Topeconomists believe that by the end of 2011 growth will be secured and the property market will pick up again. • UK construction has suffered a 14% fallbetween April and August. Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  10. GDP Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  11. ConsumerSpending • UK Domestic demand has increased by 11% since 2009, but now... • £90bn government spending cuts; job prospects worsening; consumer confidence suffering • The average UK household had only £131 a week of discretionary spend in February, • 9.2 %less than the previous year Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  12. Exports Manufacturing in the UK up from -14% Y.O.Y. In 2009. To 5% Y.O.Y. In 2010. Due to UK exports,of premium nature gaining popularity in developing economies. Scotch Whisky exports up 17%. Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  13. MONEY AND FINANCIAL MARKETS Summary PRESENTED BY: • Consumer confidence worsening • House prices and construction troughed; may not recover until 2011 • High-street suffering; reduced disposable income • Despite this, AD stimulated by exports to the East... Hold rates at 0.5%; no QE, allowing scope. • DAVID HULSE Deflationary Pressures Wirral Grammar School • This Section Covers: • Quantitative Easing • Stock Markets • Exchange Rates COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS Inflationary Pressures LABOUR MARKET OVERALL SUMMARY

  14. Quantitative Easing • Intention to stimulate investment • UK strategy currently paused at £200bn • Americans introducing an additional US$600bn • Knock-on effects around the world Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  15. FTSE 100 – 3 year trend Stock Markets Wirral Grammar School Currently recovering and predicted to remain between 5500-5600 COSTS AND PRICES Peak 10th December 2007 – 6,568 DEMAND MONEY & FINANCIAL MARKETS Trough 3rd March 2009 – 3,518 LABOUR MARKET OVERALL SUMMARY

  16. Overall trend is slightly decreasing – 1.64 down to 1.60 over the whole period Risen from 1.43 to 1.60 over the last six months Exchange Rates Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  17. General trend over the period is increasing – from 1.11 to 1.15 6 month period – 1.15 to 1.14 Exchange Rates Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  18. Exchange Rates Wirral Grammar School COSTS AND PRICES The pound per Euro is expected to experience a steady drop to .75 by 2012 DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET The pound per dollar is expected to experience a steady rise into 2011 OVERALL SUMMARY

  19. Unemployment Employment Productivity Earnings Growth LABOUR MARKET Summary PRESENTED BY: Increased Confidence Investment levels increasing Strength of the £ International Uncertainty Inflationary Pressures • SCOTT WATSON Wirral Grammar School • This Section Covers: COSTS AND PRICES Deflationary Pressures DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  20. Unemployment • Unemployment - 2.47 Million Wirral Grammar School • Decline of available jobs • Companies strive for productive efficiency • Deflationary effect as consumer spending is lowered COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  21. Employment • Spending cuts and VAT riseCuts to cost estimated 1.6 million jobs 900 000 private sector jobs could go. inevitable public sector job cutssharp increase in part time jobs as apposed to full time jobs Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  22. Productivity The growth of GDP per hour worked is highest for the UK Relative to other countries the UK is becoming more productive Therefore lower costs relatively and more appealing exports This is an Inflationary pressure Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  23. Earnings Growth Here we can see that the average earnings of employees has risen by 2.0 % Wirral Grammar School COSTS AND PRICES This is below the rate of inflation at the moment meaning that people have less disposable income , which means lower consumer spending and as a result is a deflationary pressure DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  24. OVERALL SUMMARY Summary • 25% devaluation of the £ - Since Mid-2007 • Increasing food, commodity & energy prices • VAT to 20% in January The future shows no signs of improvement due to events such as spending cuts and a rise in vat We can that there are mainly deflationary pressures in the form of: • Unemployment • Earnings growth • As opposed to the inflationary pressure of increased productivity Inflationary Pressures Deflationary Pressures Wirral Grammar School COSTS AND PRICES • Spare capacity – 7.7% unemployment • Fiscal Tightening • International Uncertainty DEMAND Deflationary Pressures MONEY & FINANCIAL MARKETS Inflationary Pressures LABOUR MARKET OVERALL SUMMARY

  25. I N T E R E S T R A T E S 0 . 5 % Q U A N T A T I V E E A S I N G £ 5 0 B I L L I O N Wirral Grammar School COSTS AND PRICES DEMAND MONEY & FINANCIAL MARKETS LABOUR MARKET OVERALL SUMMARY

  26. Wirral Grammar School THANK YOU FOR LISTENING

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