Are higher prices hurting Labour?
Tuesday, March 30, 2010 at 08:51AM
Simon Ward

The economic polling model discussed in prior posts suggested that the Conservative lead over Labour would fall into hung parliament territory in early 2010 but rewiden in the spring, mainly reflecting the negative impact on government popularity of a sharp increase in retail price inflation. Recent polls, showing a Tory fightback, are consistent with this "forecast".

The model uses ICM polling data, which extends back to the early 1980s. (ICM is well-regarded, having scored a notable success at the 1997 election.) Based on recent economic data and a forecast further rise in inflation to 4.5% by April, the model suggested a Conservative / Labour lead of seven percentage points in March, rising to nine in April and 11-12 in May – probably sufficient to produce a Conservative majority.

The latest ICM poll, published in the News of the World on Sunday, reported an eight point gap, up from six points a fortnight earlier.

The suggestion that the economy is turning less favourable for Labour is supported by the EU Commission consumer survey for March, showing a fall in the composite confidence indicator to -5 from -2 in February – a four-year high. This may reflect the impact of higher inflation on spending power – the net percentage of consumers reporting higher prices over the last 12 months rose to 18 in March, up from a low of 7 in November and above the average of 12 since 1990.

Article originally appeared on Money Moves Markets (https://moneymovesmarkets.com/).
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