Global| Sep 10 2010UK Inflation Begins To Settle Down
Summary
PPI inflation is not in the gun-sights of any central bank that targets inflation. But it's an important ingredient in the inflation mix. Most measures of inflation tend to have the same cycles so in each there is a reason to take [...]
PPI inflation is not in the gun-sights of any central bank that targets inflation. But it's an important ingredient
in the inflation mix. Most measures of inflation tend to have the same cycles so in each there is a reason to take note.
The PPI happens to be one of the most timely measures of inflation; it's already available for August. The chart shows the
UK's PPI upsurge has been breaking off. The 12-Mo, 6-Mo and 3-Mo rates of PPI inflation all have peaked in the UK. Three
month inflation is currently oscillating at a low level below the 2% rate.
Overall inflation for manufacturing is in a steady decline from 12-Mo to 6-Mo to 3-Mo. The same is true for core inflation.
While the PPI's pace is not the gauge that is nearest and dearest to the hearts of those that make policy at the BoE, these inflation trends are reassuring. To be sure what happens in the retail price index or the HICP will be more important, but right now there is still a bit of commodity price inflation in the air of the world economy and that is one channel the PPI pins down quite well. We can see it is tempered. With the economy, weak service sector inflation is unlikely to provide much inflation boost. If goods sector inflation is this well under control, overall inflation must really be settling down. It's good news for the BOE, not decisive, but good news.
| UK PPI MFG Net Output Prices | |||||||
|---|---|---|---|---|---|---|---|
| %M/M | %-SAAR | ||||||
| Aug-10 | Jul-10 | Jun-10 | 3Mo | 6Mo | 12Mo | 12Mo Yr-Ago | |
| MFG | 0.3% | 0.1% | -0.4% | 0.0% | 2.6% | 4.7% | -0.4% |
| Core | 0.3% | 0.1% | 0.0% | 1.7% | 4.3% | 4.6% | 0.8% |
| Core: ex food beverages, tobacco & Petroleum | |||||||
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
More Economy in Brief
