The Inflation Surge
Tutor2u
May 2008
The inflation surge
• Annual CPI inflation jumped to 3.0% in April
(2.5% in March)
• Rise in inflation for both goods and services
• Very steep increase in producer input costs
• Now showing through in producer prices
• Severe cost push inflationary pressures
–
–
–
–
Rising oil prices (now > $127 per barrel)
Food price inflation (agflation)
Falling pound against the Euro
Rising inflation in China and other emerging countries
Consumer Price Inflation for the UK Economy
Percent
Annual percentage change in the Consumer Price Index
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Consumer Price Inflation for Goods and Services
Annual Percentage Change, source: ONS
6
6
Inflation in Services
Percent
5
5
4
4
3
3
Goods and Services Together
2
2
1
1
0
0
-1
-1
Inflation in Goods
-2
-2
-3
-3
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
United Kingdom Consumer Prices
Annual percentage change
3.5
3.5
3.0
3.0
Percent
All items CPI
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
CPI excluding energy, food, alcohol and tobacco
0.5
0.5
0.0
0.0
-0.5
-0.5
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Annual Rate of Inflation for Selected Items
Consumer price index, annual percentage change, source: ONS
50
50
Gas prices
40
40
30
30
Electricity prices
20
Percent
20
Education
10
10
0
0
Food
Audio-visual
-10
-10
-20
-20
Jan
Apr
Jul
04
Oct
Jan
Apr
Jul
05
Oct
Jan
Apr
Jul
06
Oct
Jan
Apr
Jul
07
Oct
Jan
Apr
08
Source: Reuters EcoWin
Retail Price and Consumer Price Inflation in the UK
Annual percentage change in the retail price index and CPI
5.0
5.0
4.5
4.5
4.0
4.0
Percent
3.5
All items retail price index (RPI)
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
Consumer price index
0.5
0.5
0.0
0.0
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Input Price Inflation
Materials and fuels purchased, all manufacturing industries, seasonally adjusted
25
20
20
15
15
10
10
5
5
0
0
-5
-5
-10
-10
Percent
25
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
Producer Price Inflation
Percent
Annual % change in prices for all manufactured products
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin