Inflation update - April 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 held steady at 2.5% in March. The largest upward contribution came from transport costs as air fares rose this year compared with falls a year ago. Further upward contributions came from changes in the price of heating oil and gas, in part reflecting rises in crude oil prices. Downward contributions came from furniture and furnishings, where prices rose by less than a year ago.

Meanwhile, RPI slowed to 3.8%, down from 4.1% in February. The largest contribution to this fall came from lower housing costs, including lower mortgage interest payments and house depreciation which fell this year but rose a year ago.

With this month’s CPI in line with our forecasts, headline inflation was slightly higher than expected. Looking forward, we expect CPI to increase steadily until the summer and, after peaking at 3.0% in July, to come down gradually to meet the 2% inflation target by early 2009.

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