July 2010:
UK BPI -1.5%
London BPI -1.5%
June 2010:
UK BPI -1.8%
London BPI -1.8%
Thursday 12 August 2010
Immediate Release
Underlying business inflation weak
July 2010
UK BPI -1.5%
London BPI -1.5%
June 2010
UK BPI -1.8%
London BPI -1.8%
UK:
The BPI indicates that business costs continue to fall, and figures for the second quarter have been revised down, reflecting better-than-expected labour productivity data.
Although the contribution from fixed cost inflation is particularly low, pressure from labour costs also remains subdued.
The BPI has proved to be a good leading indicator of underlying CPI inflation, once indirect taxes, such as VAT, are stripped out.
London:
London firms saw a significant fall in their total costs over the year to July, similar to the falls experienced across the country as a whole.
A rapid reduction in fixed costs, reflecting cheaper borrowing costs than a year ago, is a big part of the story. But a resumption of economic growth means that pressure from labour costs has eased somewhat.
Andrew Brigden, Senior Economist at Fathom Financial Consulting, said:
“Our own research suggests that the BPI is a good predictor of underlying inflation, excluding the effects of indirect tax changes, six months ahead. Although headline CPI inflation is currently elevated, the MPC should take comfort from the fact that cost pressures facing businesses remain subdued. Rate setters are likely to look through the effects of tax changes, such as next year’s increase in the rate of VAT. London businesses should not fear a tightening of monetary policy for some time to come”.
Dr Helen Hill, Director of Policy at the London Chamber of Commerce and Industry (LCCI) said:
“Businesses are certainly more confident, with more than a third of London firms now expecting both the UK and the London economy to improve over the next 12 months but concerns remain about underlying indicators. 69% of businesses are worried about inflation and 60% fear a rise in interest rates. Our Business Price Index suggests that these fears might be overdone. In the short-term at least, underlying inflationary pressures appear muted so London firms are right to feel more positive about the prospects of the economy overall.”
Source:http://www.londonchamber.co.uk/lcc_public/article.asp?id=0&did=47&aid=4524&st=&oaid=-1
