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Weddnesday 16th June 2021
Hi Friend,
TSE Club Inflation Update ...
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| | Inflation CPI basis hit 2.1% in May, Producer Prices increased to 4.6% ...
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| | The Saturday Economist Club Inflation Chart Book ...
We have updated our Inflation Chart Book following the release of the latest data on consumer and producer prices today. We have updated our models, forecasts and chart sets.
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| | Inflation CPI basis jumped to 2.1% in May. CPI(g) goods inflation jumped to 2.3% from 1.5% prior month. CPI(s) Service Sector inflation closed at 1.9%. Clothing and footwear increases were dominant in goods inflation. Recreation, restaurants and hotel prices featured in the service sector rise. Transport costs were also significant reflecting the rise in fuel costs.
Manufacturing output prices PPOs increased to 4.6%. Manufacturing input costs increased to 10.7% largely due to the hike in metal prices and the comparative jump in oil costs year on year.
Manufacturing
input costs are volatile. The pass through rates are roughly 50% from
PPIs (input prices) to PPOs (output prices). The pass through rates are
roughly 70% from PPOs to CPI goods. CPI(g) accounts for roughly 50% of
the total CPI index.
Oil Remains the Big Story ... So what next for oil?
Oil remains the big story for producer prices. Petroleum costs increased by 67% (output) in the month.
Chemicals and metals prices increased by 5%.
Oil prices Brent crude averaged $29 dollars in May last year, compared to $69 dollars this year. Despite the calls for $100 dollar oil … we expect the oil price comparisons to ease through to the end of the year.
We forecast oil prices to average $65 dollars over the period as US oil rigs come back on stream. Metal prices are also expected to ease despite the slight increase last week.
We expect inflation to hit the 3% level in the next few months. Easing to 2.5% perhaps by the end of the year. The Bank of England is unlikely to adjust the monetary policy framework, as a result of the rise in what is seen as a "transitory" phenomenon.
Got a view? Got any questions? Got any comments? Would you like to know more? Just let me know ...
Thanks J
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