Global| Aug 14 2007UK Inflation Turns Sharply Lower
Summary
Inflation is slowing on a broad front in the UK in July - a quite unexpected development. Year/year, the Harmonized Index of Consumer Prices (HICP) is now below the 2% ceiling rate and suddenly that BOE inflation letter explaining why [...]
Inflation is slowing on a broad front in the UK in July - a quite unexpected development. Year/year, the Harmonized Index of Consumer Prices (HICP) is now below the 2% ceiling rate and suddenly that BOE inflation letter explaining why inflation had drifted above 3% seems oh so distant. The Retail Price Index (RPI) is still high but the Retail Price Index ex Mortgage Interest Payments (RPIX) tells the tale of sharply lower inflation too. Food costs are sharply lower. So are clothing and footwear, where price fell over three months.
This could be somewhat of a catalytic month for the BOE as well as for the ECB. Not only are we in the midst of financial turmoil at a time that the ECB had pointed strongly to a rate hike, but GDP growth has slowed. Now inflation, the reason for hiking rates is sharply lower, at least in the UK but also in France. Are things changing all that much or is this coincidence? Do you believe in Coincidence?
| M/M % Change | % SAAR | ||||||
| Jul-07 | Jun-07 | May-07 | 3-MO | 6-MO | 12-MO | Yr Ago | |
| HICP | -0.3% | 0.3% | 0.1% | 0.4% | 1.5% | 1.9% | 2.4% |
| RPI: All Items | -0.3% | 0.6% | 0.3% | 2.4% | 3.5% | 3.8% | 3.3% |
| RPIX (ex mortgage interest) | -0.3% | 0.5% | 0.2% | 1.4% | 2.3% | 2.7% | 3.1% |
| RPI ex seasonal food | -0.2% | 0.6% | 0.3% | 2.5% | 3.5% | 3.9% | 3.2% |
| Food & Beverages | -0.9% | 0.9% | 0.2% | 0.7% | 3.7% | 3.2% | 2.7% |
| Housing & HH Expenditures | -0.5% | 1.0% | 0.3% | 3.1% | 4.3% | 6.8% | 5.1% |
| Clothing & Footwear | 0.1% | 0.1% | -0.4% | -0.8% | 2.8% | 0.1% | -1.3% |
| Leisure Services | -0.1% | 0.3% | 0.2% | 1.9% | 1.3% | 2.8% | 2.1% |
| Leisure Goods | -0.1% | -1.4% | 0.1% | -5.6% | -4.8% | -3.0% | -2.5% |
| Motoring Expenditures | -0.4% | 0.7% | 1.0% | 5.2% | 3.9% | -0.3% | 3.1% |
| Fares and Travel Costs | 0.0% | 0.9% | 3.1% | 17.3% | 10.9% | 8.6% | 0.0% |
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.
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