Inflation Report November 2009

Costs and prices

Chart 4.1 Contributions to CPI inflation (a) (a) Contributions to annual (non seasonally adjusted) CPI inflation. (b) Includes a rounding residual.

Chart 4.2 CPI and households’ inflation expectations for the year ahead, scaled to match CPI inflation (a)(b) Sources: Bank of England, Barclays Capital, Citigroup, GfK NOP, research carried out by GfK NOP on behalf of the European Commission, ONS and YouGov. (a) Survey-based measures (apart from GfK NOP) have been scaled to have the same mean as CPI inflation over a comparable time period. (b) The questions ask about expected changes in prices over the next twelve months, but do not reference a specific price index. All measures are based on the median estimated price change, except GfK NOP which captures the weighted net balance expecting prices to increase.

Chart 4.3 Measures of households’ inflation expectations beyond a year ahead (a) Sources: Bank of England, Barclays Capital, Citigroup, GfK NOP and YouGov. (a) The questions do not reference a specific price index. All measures are based on the median estimated price change.

Chart 4.4 CPI inflation and households’ inflation expectations Sources: Barclays Capital and ONS. (a) Recessions are defined as two consecutive quarters of falling output (at constant market prices) estimated using the latest data. The recessions are assumed to end once output began to rise. (b) Barclays BASIX two year ahead measure. The question does not reference a specific price index. Measure is based on the median estimated price change.

Chart 4.5 Import prices excluding fuels and the sterling ERI Sources: Bank of England, ONS and Bank calculations. (a) Quarterly averages of daily data up to 2009 Q3. The diamond is an average over the fifteen working days to 4 November (b) Excluding the estimated impact of missing trader intra-community fraud. The latest observation is 2009 Q2.

Chart 4.6 CPI non-energy industrial goods and CPI services (a) CPI goods excluding food and non-alcoholic beverages, alcoholic beverages and tobacco, fuels and lubricants, and electricity, gas and other fuels.

Chart 4.7 Energy prices Sources: Bloomberg, Reuters, Thomson Datastream and Bank calculations. (a) Brent forward price for delivery in 10 to 21 days’ time. (b) Futures prices for November 2009 are averages during the fifteen working days to 4 November. Gas futures prices from December 2009 to February 2011 are monthly averages of daily data. Thereafter, gas futures prices have been interpolated from quarterly data. (c) One-day forward price of UK natural gas.

Chart 4.8 Distribution of private sector wage settlements Sources: Bank of England, Incomes Data Services, Industrial Relations Services and the Labour Research Department. (a) Based on settlements effective between 1 January and 4 November (b) A settlement that is a round number is classified within the bucket where that round number is the upper bound. For example, a 2% settlement is included within the 1% to 2% bucket.

Chart 4.9 Manufacturing output prices excluding food and energy (a) (a) Excluding food, beverages, tobacco and petroleum products. Data are non seasonally adjusted.

Tables

Table 4.A Private sector earnings (a) Percentage changes on a year earlier Averages since 2000 Q1Q2JulyAug.Sep. (1) AEI regular pay n.a. (2) Pay settlements (b) (1)–(2) Regular pay drift (c) n.a. (3) Total AEI n.a. (3)–(1) Bonus contribution (c) n.a. Memo item: AWE (d) n.a. Sources: Bank of England, Incomes Data Services, Industrial Relations Services, the Labour Research Department and ONS. (a) Three-month moving average measures unless otherwise stated. (b) Average over the past twelve months. (c) Percentage points. (d) AWE data excluding arrears. Average is since March The AWE is not classified as a National Statistic.

Table 4.B Indicators of output prices in the services sector Sources: CBI, CIPS/Markit and ONS. (a) Percentage change on a year earlier. The Services Producer Price Index is an experimental index. It is not classified as a National Statistic. (b) Averages of monthly data. A reading above 50 indicates increasing average prices this month relative to the situation one month ago. (c) Percentage balance of respondents reporting average selling prices to be ‘up’ relative to ‘down’ over the past three months. Averages since 2000Q4Q1Q2Q3Oct. Services Producer Price Index (a) n.a. n.a. CIPS/Markit services (b) CBI business and professional services (c) n.a.

Temporary factors affecting CPI inflation in the near term

Chart A Change in the contribution of energy and food to twelve-month CPI inflation from September 2009 assuming unchanged prices

Chart B Two stylised illustrations of the contribution of the changes in VAT to twelve-month CPI inflation (a) All prices subject to the standard rate of VAT vary in response to the temporary VAT change. (b) Half the CPI basket subject to the standard rate of VAT varies in response to the temporary VAT change.