Inflation Report August 2007

Costs and prices

Chart 4.1 Consumer prices

Chart 4.2 Private sector earnings (a) (a) Three-month moving average measures of the private sector average earnings index. (b)Percentage points. Defined as private sector average earnings growth less regular pay growth.

Chart 4.3 Private sector wage settlements in H1 and lagged inflation (a) Sources: Bank of England, Incomes Data Services, Industrial Relations Services, the Labour Research Department and ONS. (a)The average annual increase in wage settlements over the first six months of each year compared with average annual inflation over the final six months of the previous year.

Chart 4.4 Alternative measures of private sector earnings (a) (a) Three-month moving average measures. The average weekly earnings series is experimental.

Chart 4.5 Sterling commodity prices Sources: Bank of England, The Economist and Thomson Datastream. (a)Forward price for delivery in 10 to 21 days’ time. (b)Weekly data for the US dollar Economist metals index, which includes nickel, tin, zinc, copper, lead and aluminium, converted into sterling using daily market exchange rates.

Chart 4.6 Manufacturers’ producer prices and measures of capacity utilisation for the major economies (a) Sources: Bank of Japan, Board of Governors of the Federal Reserve System, Bureau of Labor Statistics, Eurostat and ONS. (a)Measures of producer prices and capacity utilisation for the euro area, Japan and the United States weighted together by shares of UK import values. The 2007 Q2 reading for euro- area producer prices is based on data for April and May. (b)Capacity utilisation measures are taken from the European Commission business survey, the Tankan survey and a measure calculated by the Board of Governors of the Federal Reserve System.

Chart 4.7 Producer prices (a)The experimental Services Producer Price Index, on a net sector basis.

Chart 4.8 BCC survey: concerns over inflation and competition (a) Sources: BCC, ONS and Bank calculations. (a)Percentages of firms citing each factor as more of a concern to their businesses than three months ago. Non seasonally adjusted data. Manufacturing and service sector responses are weighted together using their nominal shares of output.

Chart 4.9 Bank/GfK NOP survey of households’ inflation expectations over the next twelve months (a) (a)Respondents’ expected change in prices in the shops over the next twelve months. Proportions exclude those respondents who said they had no idea.

Tables

Table 4.A Contributions to CPI inflation (a)

Table 4.B Survey measures of prices (a). Sources: Bank of England, BCC, CBI, CBI/Grant Thornton and CIPS/NTC. (a) The BCC and CBI surveys ask about prices over the next three months. The CIPS/NTC surveys ask about prices over the past month and the Agents’ scores refer to prices over the past three months compared with a year earlier. The quarterly BCC and CBI/Grant Thornton surveys have been allocated to the final month in each quarter. (b) The averages for the CIPS/NTC manufacturing, BCC and CBI/Grant Thornton surveys are since the series began in November 1999, 1997 Q2 and 1998 Q4 respectively. The averages for the Agents’ scores are since July 1997 for manufacturing and January 2005 for services.

Table 4.C Surveys of households’ inflation expectations over the next twelve months Sources: Bank of England, Citigroup, GfK NOP, YouGov and research carried out by GfK NOP on behalf of the European Commission. (a) Averages of monthly data for YouGov/Citigroup and GfK NOP. (b) Median of respondents’ expected change in prices in the shops over the next twelve months. (c) Median of respondents’ expected change in consumer prices of goods and services over the next twelve months. (d) Net balance expecting prices to increase. The question asks: ‘In comparison with the past twelve months, how do you expect consumer prices will develop in the next twelve months?’.

Food price inflation

Chart A Contribution of food to CPI inflation (a)Contribution of food and non-alcoholic beverages to annual (non seasonally adjusted) CPI inflation.

Chart B International measures of annual food price inflation less domestic CPI inflation (a) Sources: Bureau of Labor Statistics, Eurostat and ONS. (a)Annual inflation rates for food and non-alcoholic beverages less overall domestic CPI inflation. Non seasonally adjusted.