As the CPI falls for a third month the Bank of England has still produced 41% more price inflation than they should
The CPI numbers have come in courtesy of the government funded Office for National Statistics, and they report that the CPI is now back to 2.4% – not far off 3 straight years of above target CPI inflation.
From the report:
- The Consumer Prices Index (CPI) annual inflation stands at 2.4 per cent in June 2012
- The Retail Prices Index (RPI) annual inflation stands at 2.8 per cent in June 2012
Headlines for the June 2012 Consumer Price Indices
• CPI annual inflation stands at 2.4 per cent in June 2012, down from 2.8 per cent in May. This is the third month in a row that the annual rate has fallen. It is now at its lowest since November 2009, when it was 1.9 per cent. The CPI stands at 122.3 in June 2012 based on 2005 = 100
- The largest downward pressures to the change in CPI annual inflation between May and June came from clothing & footwear, transport and food & non-alcoholic beverages
- The largest upward pressure to the change in CPI annual inflation between May and June came from recreation & culture where prices, overall, for audio-visual equipment has risen on the month
And the monthly:
The CPI fell by 0.4 per cent between May and June this year. This is the largest fall in prices between a May and June since the CPI was launched in 1996 and the first time since the start of 2009 where prices have, overall, fallen for two consecutive months. Between 1996 and 2011, the one-month change between May and June has varied between a fall of 0.2 per cent and a rise of 0.7 per cent.
The most significant downward contributions to the 1-month change in the CPI between May and June 2012 came from:
- clothing & footwear: prices, overall, fell by 4.2 per cent. This is twice as large a fall as the next biggest between these two months since the CPI was launched in 1996. Downward effects came from across the clothing & footwear sector, with reports of summer sales starting earlier than last year
- transport: prices, overall, fell by 0.5 per cent. The largest downward pressure came from motor fuels. Petrol prices fell by 4.3 pence per litre on the month to stand at £1.33 per litre. Diesel prices fell by 4.7 pence per litre to stand at £1.39 per litre
There were no significant upward contributions to the 1-month change in the CPI between May and June 2012.
So all the coverage today will be about how the CPI in the UK is nearly back to 2% – but people are forgetting that this is nearly 3 years of the Bank of England producing too much CPI inflation – in fact the Bank of England has produced so much ‘extra’ inflation over the past 3 years, 41% too much to be precise, it means that even if the monthly CPI comes in at zero for the next 12 months the Bank of England would merely just be back to where it should’ve been all along.
Also a print below expectations should get people that are fond of the purchasing power of their money worried – all today’s data mean that the BoE will feel that much more emboldened to print… A £500bn balance sheet here we come.
- As the CPI falls to 2.8% HSBC brings forward to July their forecast for more money printing by the Bank of England
- UK inflation rises to 0.6 month on month – that’s 7.2% annualised – gold price drops on the news
- UK CPI falls to 3% – too low for the Bank of England, money printing to start within 3 months? The IMF certainly thinks so
- Producer prices in the UK fall giving the Bank of England more scope to print
- As PMI falls to it’s lowest level this year ‘factory gate’ inflation hits a 7 month high
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