Inflation update - September 2008

Keeping up to date with changes in inflation is important for your business. EEF's monthly inflation update provides the latest data on the economy and the state of manufacturing.

CPI inflation rose to 4.7% in August, more than doubling the rate at the beginning of the year. As was the case in July, the largest upward contribution came from rising food prices as bread, cereals and meat prices rose by more than last year. Large upward contributions also came from an increase in housing costs as gas and electricity prices were 28% and 18% higher than a year ago.

The recent fall in oil prices helped offset some of these increases. Headline inflation slowed to 4.8%, down from 5.0% in July. RPI excluding mortgage payments also eased in August, to 5.2% from 5.3% in July.

CPI came in slightly firmer than expected, while both RPI and RPIX were lower than forecast. We have nudged down our forecasts and now expect CPI to peak at 5.1% in October.

We expect CPI to remain above 4% until the second quarter of 2009, before gradually coming back to target by the end of next year. This is in line with the Bank of England’s forecasts

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