Tuesday, July 12, 2011
Welcome respite on inflation
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

Though there are some nasty utility price rises to come, the Bank of England will be encouraged by the drop in headline consumer price inflation from 4.5% to 4.2% and the drop in the core rate from 3.3% to 2.8%. It suggests weak demand is bearing down on inflation and that the spare capacity story is not entirely dead. Welcome news.

More here on the inflation figures. Three components of the CPI have very low inflation, including clothing and footwear, 1.5%, communication, 1.7%, and recreation and culture (minus 0.5%). Food, 6.9%, alcohol and tobacco, 9.6%, and transport, 7.9%, are at the opposite end of the spectrum.

Also out today, trade figures for May, which were disappointing. The overall trade deficit widened to 4.1 billion, from 3.1 billion in April. The figures are here.