Rising inflation to clobber profits, jobs

Yet another 'surprising' surge in inflation to 3.8% on the CPI (Completely Pointless Index). As usual the inflation is coming mostly from imported goods, particularly oil and food. Firms will try to pass on these increases to consumers, but will mostly fail because real wages are falling and consumer credit is drying up.

Instead they will mostly have to take the hit in their profit margins (which have been at all time highs over the past few years) as consumers cut back and find alternatives.

This means lower investment and higher unemployment, exacerbating the forthcoming recession. This is already happening. Confidence in the service industries has plummeted to an all-time low (see chart). Meanwhile, unemployment has jumped at its fastest rate for 15 years.

In an economy where growth is entirely reliant on the service sector this spells disaster. Anyone suggesting a rate increase at this stage might possibly help matters is barking.