The shock non-Murdoch news this week is that inflation appears to have fallen. The CPI rate is down from 4.5% to 4.2%. Most analysts would say the culprits are retailers (especially in electronics) thanks to their prevalent early summer sales, but it helps Mervyn King and his posse keep interest rates where they are, which most would agree is a positive.
But 4.2% feels inconsequential to most businesses that have seen costs rise massively over the past year or so. Utilities are a simple example with British Gas being the latest to announce a massive and non-negotiable price rise last week of 18%. Fuel costs, postage costs, raw material costs from carbon fibre to cotton – all have lifted by far more than four-point-something percent.
Suppliers will tell buyers it’s a globalisation effect, that China’s growth inflates prices, that Japan’s manufacturing inability increases scarcity, that a sterling-euro parity is to blame, that jumps in NI and VAT are a factor. Regardless of the reasons, just 4.2% would be a blessing to many who control the cost of sales in their businesses.
This is why I can’t help but smile when I hear a business leader say with pride that they’re up 5 or 10 or 15% year on year. Sure, in these troubled times, growth is something to cherish, but when it’s a given that your costs have risen, at what point is growth actual growth?
In 2010 and 2011, 10% sounds like standing still to me. How about you, what does your real growth number start at? Or, is any metric in the black, a reason to get the bubbly out?