Monday, 19 July 2010
It will always be inflation – UK Inflation – May 2010 Update
For now though inflation is still with us. The Office for National Statistics has reported the June 2010 UK Consumer Price Index (CPI) as 3.2% down from 3.3% and the UK Retail Price Index (RPI) as 5.0% which is down from 5.1%% last month. So at this rate it will take another 12 months for inflation to return to the Bank of England’s target of 2%. Unfortunately though we already have an inflation increase of 1.77% baked into the CPI pie the vast majority of which will hit us in January of 2011. In addition we see just about every day talk of wage increases in various factories in China. Given the number of items that I see in the UK with a Made in China sticker this also seems inflationary. In fact about the only thing I can see deflating in the near future are house prices.
As always my first chart is tracking the CHAW Index which is the RPI including all Items. I focus on the RPI as my National Savings and Investments Index Linked Savings Certificates use the RPI to index from. I currently have 21% of my low charge portfolio held within them which are proving their worth given that the RPI has been over 4% for four months now and the trend seems to be continuing. The current level of the Index remains well above the trend line and continues to diverge upwards from trend.
The second chart is again based on the CHAW Index. This chart shows annual figures based on the previous 3, 6 and 12 month’s worth of data. As of February the 12 month figure is 5.0% (as published by the ONS), the 6 month figure is 5.6% annualised down from 6.5% and the 3 month figure is 6.2% annualised down from 8.0% annualised. So the inflation continues nicely.
As always do your own research.