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Economy in Brief

UK Core PPI Inflation on the Rise Again
by Robert Brusca January 14, 2008

UK Core PPI inflation is making a strong move above the 2% inflation threshold that the Bank of England applies to overall consumer inflation (HICP). While the PPI is not the main inflation metric for the Bank, the surge of inflation at this earlier stage of production is not welcome news. PPI inflation can be erratic in the UK. Since Early 2006 this is already the third inflation cycle. Three month inflation peaked around 3.75% before mid-2006 and again around April 2007; the pace of inflation is again heading higher again in late 2007. While the successive peaks for inflation were higher during this episode, the troughs were lower. Through all this, core inflation on a Yr/Yr basis has been broadly steady. But after edging lower through November, Yr/Yr core inflation has tuned higher in December. Although such a move makes a BOE rate cut less likely, the surge in the PPI came as sterling was hitting a new low vs the euro, the weakest since Dec 1996. Britain, the Euro Area and US all have Central Banks facing tough policy choices.


UK PPI
% M/M %-SAAR
Dec-07 Nov-07 Oct-07 3-Mo 6-Mo 12-MO 12-Mo Y-Ago
MFG 0.8% 0.8% 0.7% 9.5% 5.8% 5.0% 2.2%
Core 0.4% 0.2% 0.2% 2.9% 2.6% 2.6% 2.4%
Core: ex food beverages, tobacco & Petroleum
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