Another upward spike in inflation

The annual rate of consumer price inflation has spiked up to 4.7% in August - up from 4.4% a month earlier.

The striking numbers this month seem to me to be the surge in the prices of goods with goods price inflation now running ahead of price rises for services for the first year in many a long year. A sharply lower exchange rate, increased manufacturing and shipping costs together with accelerating inflation in many of the lower-cost manufacturing centres of the world are just three of the factors causing goods price inflation to climb above 5%.

The Bank of England has forecast that inflation will climb above 5% in the near term. The good news is that falling world oil prices and a downturn in other internationally traded commodities is likely to bring some relief to interest rate setters as we move through the autumn, giving the Monetary Policy Committee scope for rate cuts starting in October or November.

Inflation affects different people in different ways and few of us experience the same rate of inflation. But the upward movement in the consumer price index is a huge cause for concern.

Latest inflation numbers are available in this powerpoint file

UK_Inflation_Data.ppt

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