Tuesday, May 18, 2010

U.K. Inflation Continues Uptick

My take? The issue will be containing this run up in inflation, but it is an easier task dealing with moderate (for now) inflation than disinflation / deflation.

Market Oracle details:

UK Inflation has yet again hit a new high of CPI 3.7% up from last months inflation peak of 3.4%, with RPI rocketing even higher to an eye watering 5.3%, a level not seen since 1991. The academic economists were again taken by surprise. The Bank of England's failure in its primary duty of targeting inflation has prompted the Governor Mervyn King to write another letter to this time the new Chancellor George Osbourne that will again state for the fifth time this year that the rise in inflation above 3% was temporary and not to worry, it should come down, eventually (fingers crossed).

The concern is that it appears the upward trend in prices is widespread (i.e. not just an energy phenomenon per the U.S.).

The largest upward pressures to the change in the CPI annual rate between March and April came from:

  • Clothing and footwear where prices, overall, rose by 2.2 per between March and April this year but rose by only 0.2 per cent a year ago; this was mainly due to garments and, in particular, women’s clothing.
  • Food and non-alcoholic beverages, mainly due to the food component where upward effects were widespread rather than from one particular food group. Reports have suggested that the closure of European airspace as a result of the Icelandic volcano had a limited impact on food prices in April.
  • Alcoholic beverages and tobacco where prices, overall, rose by 2.1 per cent between March and April this year (driven by the increases in excise duty that came into force towards the end of March) but were unchanged a year ago.

Darn volcanos!

Source: Stats.Gov.UK

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