Highest UK Inflation for 16 Years –
but is the worst over?
Tutor2u Economics
October 2008
www.tutor2u.ne
Consumer Price Inflation for the UK Economy
Percent
Annual percentage change in the Consumer Price Index
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: UK Statistics Commission
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Consumer Price Inflation for Goods and Services
Annual Percentage Change, source: ONS
6
6
Inflation in Services
Percent
5
5
4
4
3
3
Goods and Services Together
2
2
1
1
0
0
-1
-1
Inflation in Goods
-2
-2
-3
-3
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
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United Kingdom Consumer Prices
Annual percentage change
6
5
5
4
4
3
3
Percent
6
All items CPI
2
2
1
1
CPI excluding energy, food, alcohol and tobacco
0
0
-1
-1
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
www.tutor2u.ne
Annual Rate of Inflation for Selected Items
Consumer price index, annual percentage change, source: ONS
50
50
Gas prices
40
40
30
30
Electricity prices
20
Percent
20
Education
10
10
0
0
Food
Audio-visual
-10
-10
-20
-20
Jan
Apr
Jul Oct Jan Apr Jul Oct Jan
04
05
All items (CPI)
Audio-visual equipment and services
Apr
Jul
06
Oct
Jan
Food
Gas
Apr
Jul
07
Oct
Jan
Apr
Jul
08
Education
Electricity
Source: Reuters EcoWin
www.tutor2u.ne
Consumer Price Inflation in Selected Countries
Annual percentage change in consumer prices
6
6
5
5
United States
Percent
4
4
3
3
2
2
1
1
0
UK
0
Japan
-1
-1
-2
-2
-3
-3
China
-4
-4
-5
-5
00
01
02
03
04
05
06
07
08
Source: OECD World Economic Outlook
www.tutor2u.ne
Input Costs and Manufacturing Producer Prices
Percent
Annual percentage change, seasonally adjusted
30
30
25
25
20
20
15
15
10
10
Imported materials
5
5
0
0
Manufactured goods
Imported foods
-5
-5
-10
-10
Jan
Apr
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Jul
04
Oct
Jan
Apr
Jul
05
Oct
Jan
Apr
Jul
06
Oct
Jan
Apr
Jul
07
Oct
Jan
Apr
Jul
08
Source: Reuters EcoWin
Selected Weights in the UK Consumer Price Index
Total weights for the CPI = 1000. Source: Office of National Statistics
140
140
130
130
120
110
110
100
100
90
1996=100
120
Housing, water and fuels
90
Foods
80
80
70
70
60
60
Clothing and footwear
50
50
40
40
Alcohol, tobacco and narcotics
30
30
20
20
Education
10
10
0
0
99
00
01
02
03
04
05
06
07
08
Source: UK Statistics Commission
www.tutor2u.ne
Inflation and the Exchange Rate for the UK
Exchange rate index (top pane) and inflation (lower pane)
110
110
Percent
Index
Sterling Exchange Rate Index
105
105
100
100
95
95
90
90
85
85
80
80
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
5.5
5.0
4.5
4.0
3.5
Consumer Price Inflation
3.0
2.5
2.0
1.5
1.0
0.5
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
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Price deflation for clothing and audio-visual equipment
% change in prices year on year, data is from the UK consumer price index
0
0
-2
Clothing
-4
-4
-6
-6
-8
-8
-10
-10
-12
-12
Audio-visual equipment
-14
millions
Annual % change year on year (millions)
-2
-14
-16
-16
97
98
99
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
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Earnings and Prices
Annual percentage change in earnings and consumer prices
6
6
Percent
5
5
Average Earnings
4
4
3
3
Consumer price inflation
2
2
1
1
0
0
00
01
02
03
04
05
06
07
08
Source: Reuters EcoWin
www.tutor2u.ne