One of the reasons our economy could be in a real mess this year is that the price of basic stuff like fuel and food is going up fast. That means that it’s difficult for the central banks in Britain and Europe to justify lowering interest rates to encourage us to spend more — because spending would spur more inflation, which could get out of control.
In developed countries, inflation is kind of like oxygen; it’s an essential thing that’s always there, but difficult to detect as we go about our day-to-day lives. At current rates (somewhere between 2 and 4 percent depending on what's being counted), prices tick upward so slowly that we only notice them at milestones: petrol going over £1 per litre, for instance, or oil hitting $100 a barrel. When it comes to some commodities, price changes are even further under the radar. Food, for instance, is relatively cheap, and supermarkets and shops can change prices by a little bit every day, so we barely notice the upward creeping.
One exception to this is restaurants. Not only are restaurants in highly competitive markets, but prices aren't simply a function of input costs, and changing itself usually involves spending profits, to print new menus (a quirk that has lent its name to a broader economic phenomenon).
Customers also expect relatively simple pricing structures (£2, £9.95, £12.50), which increases the chance of those numbers going up in 50p or £1 increments. For these reasons, restaurants tend not to change prices as often as supermarkets, and the changes tend to be more dramatic when they do.
Which brings us to one of west London’s unofficial economic indicators. We've been partial to Falafel Hut in Shepherd’s Bush Market for about five years. Throughout that time, one of the tastiest falafels west of Beirut has always cost £2.50.
Until last week, that is, when the price leapt to £3. Now even though that’s well below 4 per cent inflation in the long term, it's also a whopping 20 per cent week-on-week increase. And so by this simple measure, it’s not only the chilli sauce that’s packing a punch.
By Mike W
Image taken from Karin Cameron's Flickr photostream.