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Economy in Brief

UK Inflation Takes Another Step Up
by Robert Brusca  March 22, 2011

The UK HICP and RPIX indices rose sharply in February but slowed their pace from January, when the HICP rose by 0.9% and the RPIX rose by a sharp 1.1%. The measure of core inflation lags. But the core rate has been accelerating as the headline pace has risen. With headline inflation up at a pace of 8.2% over three months the core on a one-month lag is at a pace of 4.7% Headline inflation has risen steadily from 4.3% Yr/Yr to 6% over six months to its current 8.2%. The annualized pace of core inflation likewise has risen from 3.3% over 12-months to 4% over six months to 4.7% over three months. The sequential growth in inflation is widespread across the various RPI categories. Inflation in the UK really seems to have taken root

Inflation is more than twice the ceiling for inflation pursued by the Bank of England. Commodity prices are being blamed for the price run up. But the VAT has been hiked this year and it seems that, despite concerns about economic weakness, price increases are being passed along. Commodities after all are in the core of the HICP. That would seem to point to a rate hike sooner rather than later even with the split among BOE policymaking officials. It is being to look like BOE officials who are waiting for inflation to break by itself are waiting for Godot.

UK HICP and RPI Inflation
  % Mo/Mo % SAAR
  Feb-11 Jan-11 Dec-10 3-Mo 6-Mo 12-Mo Yr Ago
HICP 0.5% 0.8% 0.7% 8.2% 6.0% 4.3% 3.0%
  HICP Core -1Mo Lag 0.5% 0.3% 0.4% 4.7% 4.0% 3.3% 3.1%
All Item RPI 0.7% 1.1% 0.6% 10.1% 7.5% 5.5% 3.7%
   RPIx 0.7% 1.0% 0.6% 9.5% 7.3% 5.5% 4.2%
   RPIxseas food 0.7% 1.1% 0.6% 10.0% 7.5% 5.5% 3.8%
 Food & Bev 0.4% 0.9% 0.9% 9.6% 7.8% 6.3% 0.8%
 Housing and HH expend 0.3% 1.1% 0.5% 7.9% 4.5% 3.4% 0.8%
 Clothing&Footwear 4.9% -1.0% 0.3% 17.7% 17.9% 12.7% 2.4%
 Leisure Services 0.4% 0.6% 0.3% 5.4% 5.3% 4.9% 5.3%
 Leisure Goods 0.6% -0.8% 0.7% 1.9% 0.2% 0.6% 0.8%
 Motoring expenditures 1.3% 1.9% 1.6% 21.2% 16.7% 10.5% 17.1%
 Fares and travel costs 0.9% 0.4% 0.7% 8.3% 6.9% 6.3% 3.9%
A RED highlight indicates inflation accelerating from pace of previous horizon
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