Recent Updates
- Zambia: External Debt (Q2)
- Slovenia: PPI (Jul)
- Peru: Balance of Payments (Q2) 08?19 EMERGEPR Taiwan: Industrial Production (Jun), New Motor Vehicle Registration (Jul), BOP, External Debt (Q2)
- more updates...
Economy in Brief
U.S. Index of Leading Indicators Fell Again in July
The Conference Board's Composite Leading Economic Indicators Index fell 0.4% m/m...
U.S. Philly Fed General Activity Index Back to Positive Reading in August
The current general activity diffusion index rose nearly 19 points in August to 6.2...
U.S. Unemployment Claims Slightly Lower
Initial claims for unemployment insurance went down 2,000 in the week ended August 13 to 250,000...
Inflation Rages in EMU and Hovers Globally
Inflation in the European Monetary Union in July finalizes at 8.8% year-over-year...
U.S. Retail Sales Hold Steady in July; Nonauto Sales Rise
Total retail sales remained unchanged during July (10.3% y/y)...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Louise Curley March 20, 2007
Inflation, as measured by the year over year increase in the Consumer Price Index (CPI) was 2.78%, nine basis point over January, but still below December's high of 2.97%. This is the measure that the Bank of England focuses on in assessing its monetary policy. February marked the eleventh month that inflation exceeded the Bank of England's target of 2%. During that time, the Bank of England raised its key interest rate from 4.5% to 5.25%.
While the CPI measure of inflation is the target, other aspects of inflation come into play. Core inflation, defined as the Total CPI, less Energy, Food and Alcoholic Beverages, shows a more benign picture. This measure of inflation also rose nine basis points but remains well below the 2% level as can be seen in the first chart. The widening difference between the two series was largely due to rising prices of energy. It is only recently that the substantial fall in energy prices that has taken place over the past year is beginning to work its way into the consumers' energy bill.
A less sanguine outlook for inflation appears when one looks at the Retail Price Index (RPI). This measure of inflation was 4.58% in February , compared with 4.24% in January and 4.43% in December and was the highest inflation rate since August of 1991. The RPI, includes mortgage interest and council tax payments that are not included in the CPI. The RPIX excludes these items, but it still shows a higher rate of inflation than the CPI measure, as can be seen in the second chart. The difference is due to a combination of factors, including differences in coverage of goods and services, difference in the weights used and the formulas. In February, the rate of inflation in the RPIX was 3.68%, above January's 3.54%, but below December's 3.79%.
The RPIX was the official measure of inflation until December, 2003 when the Bank adopted the CPI and it is still used in wage negotiations and in the cost of living adjustments for government pension.
INFLATION IN THE UNITED KINGDOM | Feb 07 | Jan 07 | Dec 06 | 2006 | 2005 | 2004 |
---|---|---|---|---|---|---|
Consumer Price Index (CPI) Y/Y % | 2.78 | 2.69 | 2.97 | 2.33 | 2.05 | 1.34 |
Core CPI Index Y/Y % | 1.79 | 1.70 | 1.78 | 1.30 | 1.51 | 1.09 |
Retail Price Index (RIP) Y/Y % | 4.58 | 4.24 | 4.43 | 3.19 | 2.83 | 2.96 |
Core Retail Price Index (RPIX) Y/Y % | 3.68 | 3.54 | 3.79 | 2.93 | 2.27 | 2.21 |