My Economic Predictions For The Second Half of 2008

What do we expect to see in the next few months?

1. 
   In the very near future, very likely Mervyn King as the Governor for Bank of England will have to write a letter to Chancellor Alistair Darling to explain why the inflationary target of CPI 2% ± 1% not being met. It was reported in BBC two days ago, that the inflation target is very likely to breach 4%
2. 
   People worldwide will be inevitably forced to change their lifestyle. Examples, drive lesser & use more of public transport (provided if the public transport system is reliable), eat lesser at exclusive outlet & more at home, possibly an attempt to increase personal saving due to unforeseen circumstance e.g. recession, demand for smaller & fuel efficient vehicles & etc
3. 
   Car manufacturers may possibly suffer a quarterly lost due to large number of buyers who choose to postpone their purchasing of cars due to several reasons. First uncertainty in world oil price. Second, shopping around to look for the most fuel-efficient cars
4. 
   Those people who install NGV (Natural Gas Vehicle) tanks for cars are one of the greatest beneficiaries from oil price hike. Absurd price increase had forced more & more people to look for ways to reduce their burden of fuel consumption, & among things they do is installing NGV tank
5. 
   Tesco, ASDA, Sainsburys & Morrisons which continue to enjoy great EOS will further benefit from the soaring inflation as more & more consumers will be shopping for their cheap goods
6. 
   Oil firms like British Petroleum, Exxon Mobil, Petronas & etc will continue to record billions of profits although to certain extent they may argue that they do not make much as high costs of reinvestment must be factored into their profits too
7. 
   Competitive firms who find great difficulty to pass on the increase in the costs of production to consumers will have to absorb it or reduce it elsewhere. Those which fail to do so, will be out of business very soon
8. 
   There will be an increase in strike & protests worldwide e.g. recently in India, there was a strike due the decision by federal government to increase fuel price by 10%, also possible strike to bargain for higher wages etc
9. Share market & prices of property worldwide will continue to fall. Both of these are related to households' wealth. Losses from paper assets & drop in value of houses will dampen consumers expenditure. Bear in mind that fall in C means a fall in aggregate demand (AD). This will result in various negative multiplier effect & thus possibly a further slowdown of economic growth
10. 
    For those students who are just about to learn Macroeconomics, will have a better understanding of INFLATION as now they are ‘experiencing’ it & hearing it everyday on the news