Interest Rate Increase on Hold because of “Outlook Abroad Uncertain of Late” and Growth Concerns Causing “Notable Volatility in Financial Markets,” World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, World Cyclical Slow Growth and Global Recession Risk: Part IV

 

Interest Rate Increase on Hold because of “Outlook Abroad Uncertain of Late” and Growth Concerns Causing “Notable Volatility in Financial Markets,” World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IC United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History, Cyclical Slow Growth Not Secular

II Squeeze of Economic Activity by Carry Trades Induces by Zero Interest Rates

IIB United States Industrial Production

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Sep 2015. The index of current prices paid or costs of inputs moved from 16.13 in Dec 2012 to 4.12 in Sep 2015 while the index of current prices received or sales prices moved from 1.08 in Dec 2012 to minus 5.15 in Sep 2015. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or costs of inputs at 4.12 in Sep 2015 are expanding at faster pace than prices received or of sales of products contracting at 5.15. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 28.87 in Sep 2015 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 7.22 in Sep 2015. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring

Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
Jan-11	35.79	15.79	60.00	42.11
Feb-11	45.78	16.87	55.42	27.71
Mar-11	53.25	20.78	71.43	36.36
Apr-11	57.69	26.92	56.41	38.46
May-11	69.89	27.96	68.82	35.48
Jun-11	56.12	11.22	55.1	19.39
Jul-11	43.33	5.56	51.11	30
Aug-11	28.26	2.17	42.39	15.22
Sep-11	32.61	8.7	53.26	22.83
Oct-11	22.47	4.49	40.45	17.98
Nov-11	18.29	6.1	36.59	25.61
Dec-11	24.42	3.49	56.98	36.05
Jan-12	26.37	23.08	53.85	30.77
Feb-12	25.88	15.29	62.35	34.12
Mar-12	50.62	13.58	66.67	32.1
Apr-12	45.78	19.28	50.6	22.89
May-12	37.35	12.05	57.83	22.89
Jun-12	19.59	1.03	34.02	17.53
Jul-12	7.41	3.7	35.8	16.05
Aug-12	16.47	2.35	31.76	14.12
Sep-12	19.15	5.32	40.43	23.4
Oct-12	17.2	4.3	44.09	24.73
Nov-12	14.61	5.62	39.33	15.73
Dec-12	16.13	1.08	51.61	25.81
Jan-13	22.58	10.75	38.71	21.51
Feb-13	26.26	8.08	44.44	13.13
Mar-13	25.81	2.15	50.54	23.66
Apr-13	28.41	5.68	44.32	14.77
May-13	20.45	4.55	29.55	14.77
Jun-13	20.97	11.29	45.16	17.74
Jul-13	17.39	1.09	28.26	11.96
Aug-13	20.48	3.61	40.96	19.28
Sep-13	21.51	8.6	39.78	24.73
Oct-13	21.69	2.41	45.78	25.3
Nov-13	17.11	-3.95	42.11	17.11
Dec-13	15.66	3.61	48.19	27.71
Jan-14	36.59	13.41	45.12	23.17
Feb-14	25	15	40	23.75
Mar-14	21.18	2.35	43.53	25.88
Apr-14	22.45	10.2	33.67	14.29
May-14	19.78	6.59	31.87	14.29
Jun-14	17.2	4.3	36.56	16.13
Jul-14	25	6.82	37.5	18.18
Aug-14	27.27	7.95	42.05	21.59
Sep-14	23.91	17.39	43.48	32.61
Oct-14	11.36	6.82	42.05	26.14
Nov-14	10.64	0	41.49	25.53
Dec-14	10.42	6.25	40.63	32.29
Jan-15	12.63	12.63	33.68	15.79
Feb-15	14.61	3.37	26.97	5.62
Mar-15	12.37	8.25	31.96	12.37
Apr-15	19.15	4.26	38.3	13.83
May-15	9.38	1.04	26.04	7.29
Jun-15	9.62	0.96	24.04	5.77
Jul-15	7.45	5.32	27.66	6.38
Aug-15	7.27	0.91	34.55	10.91
Sep-15	4.12	-5.15	28.87	7.22

Source: Federal Reserve Bank of New York

http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-5A. As in inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html), indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 20.8 in Dec 2012 to 0.5 in Sep 2015. The index of current prices received was minus 2.4 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 9.2 in Dec 2012 to minus 5.0 in Sep 2015. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 0.5 in Sep 2015 indicates faster expansion than the index of current prices received or sales prices of production at minus 5.0 in Sep 2015, showing contraction. Prices paid indicate faster expansion than prices received during most of the history of the index. The index of future prices paid decreased to 29.2 in Sep 2015 from 40.6 in Dec 2012 while the index of future prices received decreased from 21.9 in Dec 2012 to 6.2 in Aug 2015. Expectations are incorporating faster increases in prices of inputs or costs of production, 29.2 in Sep 2015, than of sales prices of produced goods, 6.2 in Sep 2015, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

Table IV-5A, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
10-Dec	42.8	5.3	56.0	24.2
11-Jan	48.1	12.3	58.3	34.8
11-Feb	61.1	13.4	67.7	31.5
11-Mar	59	17.6	62.4	33.4
11-Apr	52.1	23.6	56.2	35.7
11-May	49.8	20.6	54.9	28.6
11-Jun	37.4	7.2	41.4	6.9
11-Jul	34.4	5.5	49.3	17.5
11-Aug	23.6	-3.9	43.5	22.8
11-Sep	30.7	6.3	38.3	20.6
11-Oct	23	1.7	41.5	27.9
11-Nov	22.2	5.3	33.3	26.3
11-Dec	25.1	5.8	42	21.1
12-Jan	25.8	8.6	46.9	22.2
12-Feb	32.7	9.9	50.5	26.3
12-Mar	16.6	6.5	38.7	24.3
12-Apr	19.9	10	36.7	23.7
12-May	8.9	0.9	39.9	9.6
12-Jun	3.4	-4.5	34.5	16.9
12-Jul	9	3.5	29.1	21.4
12-Aug	17	6.1	36.8	23.9
12-Sep	14	2.6	39	24.9
12-Oct	18	5.2	44.1	15.4
12-Nov	22.8	5.1	44.6	10.6
12-Dec	20.8	9.2	40.6	21.9
13-Jan	12.3	-0.5	33.2	22.3
13-Feb	11.9	-0.7	33.9	22.5
13-Mar	11.4	0.6	34.3	19.3
13-Apr	7.6	-2.4	31.1	14.7
13-May	11.9	0.5	34.3	19.8
13-Jun	20.8	13.6	33.1	24
13-Jul	20.3	6	42.7	26.9
13-Aug	19.6	12	36.9	23
13-Sep	23.8	11.6	39	27.9
13-Oct	18.5	10.2	41.2	35
13-Nov	24.4	7.6	39.4	36
13-Dec	16.9	8.5	37.9	28.8
14-Jan	18.8	6.3	34.3	14.2
14-Feb	14.8	7.9	27.2	18.1
14-Mar	18.3	6.4	31.8	18.8
14-Apr	14.5	9.6	38.3	18.6
14-May	26.5	18	36.9	29.6
14-Jun	32	13.1	45.1	30.1
14-Jul	32.3	14.7	40.1	25
14-Aug	24.1	5.1	47.5	27.7
14-Sep	24.4	8	41.9	26.6
14-Oct	24.9	18.2	30.5	23
14-Nov	15.8	10	30.5	18.7
14-Dec	14.4	9.8	22.3	20.6
15-Jan	9.8	-0.2	26	20.7
15-Feb	4.7	-0.2	32.2	19.3
15-Mar	-3	-6.4	27.5	7.4
15-Apr	-7.5	-4.1	19.9	10.7
15-May	-14.2	-5.4	20.9	19.4
15-Jun	17.2	4.8	46.3	12.8
15-Jul	20.2	1.7	37.3	20.2
15-Aug	6.2	-4.9	38.4	8.7
15-Sep	0.5	-5.0	29.2	6.2

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2015. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009 with exception of minus 3.0 in Mar 2015, minus 7.5 in Apr 2015 and minus 14.2 in May 2015.

Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2015. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2015. There were only three contraction of prices paid: 3.0 Mar 2015 with sharper contraction of 6.4 of prices received; minus 7.5 for prices paid in Apr 2015 with minus 4.1 for prices received; and minus 14.2 for prices paid in May 2015 with minus 5.4 for prices received. The index of prices received fell to minus 4.9 in Aug 2015 and to minus 5.0 in Sep 2015. Prices received relative to prices paid deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

Chart IV-2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

The harmonized index of consumer prices of the euro area in Table IV-6 has similar inflation waves as in most countries (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html). In the first wave, consumer prices in the euro area increased at the annual equivalent rate of 4.9 percent in Jan-Apr 2011. In the second wave, risk aversion caused unwinding of commodity carry trades with inflation decreasing at the annual equivalent rate of minus 2.4 percent in May-Jul 2011. In the third wave, improved risk appetite resulted in annual equivalent inflation in Aug-Nov 2011 at 4.0 percent. In the fourth wave, return of risk aversion caused decline of consumer prices at the annual equivalent rate of minus 3.0 percent in Dec 2011 to Jan 2012. In the fifth wave, improved attitudes toward risk aversion resulted in higher consumer price inflation at the high annual equivalent rate of 9.6 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation fell to minus 2.8 percent in May-Jul 2012. In the seventh wave, increasing risk appetite caused new carry trade exposures that resulted in annual equivalent inflation of 6.8 percent in Aug-Sep 2012 and 5.3 percent in Aug-Oct 2012. In the eighth wave, annual-equivalent inflation was minus 2.4 percent in Nov 2012. In the ninth wave, annual equivalent inflation was 4.9 percent in Dec 2012. In the tenth wave, annual equivalent inflation was minus 11.4 percent in Jan 2013. In the eleventh wave, annual equivalent inflation was 10.0 percent in Feb-Mar 2013. In the twelfth wave, annual equivalent inflation was minus 1.2 percent in Apr 2013. In the thirteenth wave, annual equivalent inflation rose to 1.2 percent in May-Jun 2013. In the fourteenth wave, annual equivalent inflation was minus 5.8 percent in Jul 2013. In the fifteenth wave, annual equivalent inflation was 3.7 percent in Aug-Sep 2013. In the sixteenth wave, annual equivalent inflation was minus 2.4 percent in Oct-Nov 2013. In the eighteenth wave, annual inflation returned at 4.9 percent in Dec 2013. In the nineteenth wave, inflation fell at annual equivalent 12.4 percent in Jan 2014. In the twentieth wave, annual equivalent inflation was at 5.7 percent in Feb-Apr 2014. In the twenty-first wave, annual equivalent inflation was minus 1.2 percent in May 2014. Inflation volatility around the world is confusing the information required in investment and consumption decisions. In the twenty-second wave, annual equivalent inflation was 1.2 percent in Jun 2014. In the twenty-third wave, annual equivalent inflation was at minus 8.1 percent in Jul 2014. In the twenty-fourth wave, annual equivalent inflation was 3.0 percent in Aug-Sep 2014. In the twenty-fifth wave, annual equivalent inflation was minus 5.6 percent in Oct 2014-Jan 2015. In the twenty-sixth wave, annual equivalent inflation was 6.5 percent in Feb-May 2015. In the twenty-six wave, prices changed at 0.0 percent in Jun 2015. In the twenty-seventh wave, prices fell at annual equivalent 3.5 percent in Jul 2015. The bottom part of Table IV-6 provides annual inflation in the euro area from 1999 to 2014. HICP inflation was 3.3 percent in 2008 mostly because of carry trades from interest rates falling to zero into commodity futures. Exposures in commodity futures were reversed in the flight to US government obligations with resulting inflation of 0.3 percent in 2009. Reallocations of portfolios of financial investors according to risk aversion caused high volatility of inflation in 2011, 2012, 2013, 2014 and 2015.

Table IV-6, Euro Area Harmonized Index of Consumer Prices Month and 12 Months ∆%

	Month ∆%	12 Months ∆%
Aug 2015	0.0	0.1
Jul	-0.6	0.2
AE ∆% Jul-Aug	-3.5
Jun	0.0	0.2
AE ∆% Jun	0.0
May	0.2	0.3
Apr	0.2	0.0
Mar	1.1	-0.1
Feb	0.6	-0.3
AE ∆% Feb-May	6.5
Jan	-1.5	-0.6
Dec 2014	-0.1	-0.2
Nov	-0.2	0.3
Oct	-0.1	0.4
AE ∆% Oct-Jan	-5.6
Sep	0.4	0.3
Aug	0.1	0.4
AE ∆% Aug-Sep	3.0
Jul	-0.7	0.4
AE ∆% Jul	-8.1
Jun	0.1	0.5
AE ∆% Jun	1.2
May	-0.1	0.5
AE ∆% May	-1.2
Apr	0.2	0.7
Mar	0.9	0.5
Feb	0.3	0.7
AE ∆% Feb-Apr	5.7
Jan	-1.1	0.8
AE ∆% Jan	-12.4
Dec 2013	0.4	0.8
AE ∆% Dec	4.9
Nov	-0.1	0.8
Oct	-0.1	0.7
AE ∆% Oct-Nov	-2.4
Sep	0.5	1.1
Aug	0.1	1.3
AE ∆% Aug- Sep	3.7
Jul 2013	-0.5	1.6
AE ∆% Jul	-5.8
Jun	0.1	1.6
May	0.1	1.4
AE ∆% May-Jun	1.2
Apr	-0.1	1.2
AE ∆% Apr	-1.2
Mar	1.2	1.7
Feb	0.4	1.8
AE ∆% Feb-Mar	10.0
Jan	-1.0	2.0
AE ∆% Jan	-11.4
Dec 2012	0.4	2.2
AE ∆% Dec	4.9
Nov	-0.2	2.2
AE ∆% Nov	-2.4
Oct	0.2	2.5
Sep	0.7	2.6
Aug	0.4	2.6
AE ∆% Aug-Oct	5.3
Jul 2012	-0.5	2.4
Jun	-0.1	2.4
May	-0.1	2.4
AE ∆% May-Jul	-2.8
Apr	0.5	2.6
Mar	1.3	2.7
Feb	0.5	2.7
AE ∆%  Feb-Apr	9.6
Jan	-0.8	2.7
Dec 2011	0.3	2.8
AE ∆%  Dec-Jan	-3.0
Nov	0.1	3.0
Oct	0.3	3.0
Sep	0.7	3.0
Aug	0.2	2.6
AE ∆%  Aug-Nov	4.0
Jul	-0.6	2.6
Jun	0.0	2.7
May	0.0	2.7
AE ∆%  May-Jul	-2.4
Apr	0.6	2.8
Mar	1.3	2.7
Feb	0.4	2.4
Jan	-0.7	2.3
AE ∆% Jan-Apr	4.9
Dec 2010	0.6	2.2
Annual ∆%
2014		0.4
2013		1.3
2012		2.5
2011		2.7
2010		1.6
2009		0.3
2008		3.3
2007		2.2
2006		2.2
2005		2.2
2004		2.2
2003		2.1
2002		2.3
2001		2.4
2000		2.2
1999		1.2

AE: annual equivalent Source: EUROSTAT

http://ec.europa.eu/eurostat

http://ec.europa.eu/eurostat/data/database

Table IV-7 provides weights and inflation of selected components of the HICP of the euro area. Inflation of all items excluding energy increased 1.0 percent in Aug 2015 relative to Aug 2014. Prices of non-energy industrial goods increased 0.4 percent in Aug 2015 relative to a year earlier. Inflation of services was 1.2 percent in Aug 2015 relative to a year earlier.

Table IV-7, Euro Area, HICP Inflation and Selected Components, ∆%

	Weight % 2015	Aug 15 2014/ Aug 14	Jul 2015/Jul 2014	∆% Jun 2015/Jun 2014
All Items	1000.0	0.1	0.2	0.2
All Items ex Energy	893.9	1.0	0.9	0.9
All Items ex Energy, Food, Alcohol & Tobacco	697.3	0.9	1.0	0.8
All Items ex Energy & Unprocessed Food	819.4	0.9	0.9	0.8
All Items ex Energy & Seasonal Food	855.5	0.9	0.9	0.7
All Items ex Tobacco	976.3	0.1	0.2	0.1
Energy	106.1	-7.2	-5.6	-5.1
Food, Alcohol & Tobacco	196.6	1.3	0.9	1.1
Non-energy Industrial Goods	262.6	0.4	0.4	0.3
Services	434.7	1.2	1.2	1.1

AE: annual equivalent

Source: EUROSTAT

http://ec.europa.eu/eurostat

http://ec.europa.eu/eurostat/data/database

Table IV-8 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 1.2 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 3.0 percent in Aug-Nov 2011 with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.4 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012, 3.0 percent in Aug-Sep 2012 and 2.8 percent in Aug-Oct 2012. In the eighth wave, annual equivalent inflation was minus 2.4 percent in Nov 2012 and minus 1.6 percent in Nov 2012 to Jan 2013. In the ninth wave, annual equivalent inflation was 6.8 percent in Feb-Mar 2013. In the tenth wave, annual equivalent inflation was minus 1.2 percent in Apr because of reversal of commodity carry trades. In the eleventh wave, annual equivalent inflation was 1.8 percent in May-Jun 2013. In the twelfth wave, annual equivalent inflation was minus 3.5 percent in Jul 2013. In the thirteenth wave, annual equivalent inflation returned at 6.2 percent in Aug 2013. In the fourteenth wave, annual equivalent inflation was minus 1.6 percent in Sep-Nov 2013. In the fifteenth wave, annual equivalent inflation was 3.7 percent in Dec 2013. In the sixteenth wave, annual equivalent inflation was minus 7.0 percent in Jan 2014. In the sixteenth wave, annual equivalent inflation was 6.8 percent in Feb-Mar 2014. In the seventeenth wave, annual equivalent inflation was 0.0 percent in Apr-Jun 2014. In the eighteenth wave, annual equivalent inflation was minus 3.5 percent in Jul 2014. In the nineteenth wave, annual equivalent inflation was 4.9 percent in Aug 2014. In the twentieth wave, annual equivalent inflation was minus 2.4 percent in Sep-Nov 2014. In the twenty-first wave, annual equivalent inflation was 1.2 percent in Dec 2014. In the twenty-second wave, annual equivalent inflation fell at 11.4 percent in Jan 2015. In the twenty-third wave, annual equivalent inflation was 5.2 percent in Feb-May 2015. In the twenty-fourth wave, consumer prices fell at 3.0 percent annual equivalent in Jun-Jul 2015. In the twenty-fifth wave, annual equivalent inflation was 3.7 percent in Aug 2015.

Table IV-8, France, Consumer Price Index, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Aug 2015	0.3	0.1
AE ∆% Aug	3.7
Jul	-0.4	0.2
Jun	-0.1	0.3
AE ∆% Jun-Jul	-3.0
May	0.2	0.3
Apr	0.1	0.1
Mar	0.7	-0.1
Feb	0.7	-0.3
AE ∆% Feb-May	5.2
Jan	-1.0	-0.4
AE ∆% Jan	-11.4
Dec 2014	0.1	0.1
AE ∆% Dec	1.2
Nov 2014	-0.2	0.3
Oct	0.0	0.4
Sep	-0.4	0.3
AE ∆% Sep-Nov	-2.4
Aug	0.4	0.4
AE ∆% Aug	4.9
Jul	-0.3	0.5
AE ∆% Jul	-3.5
Jun	0.0	0.5
May	0.0	0.7
Apr	0.0	0.7
AE ∆% Apr-Jun	0.0
Mar	0.5	0.6
Feb	0.6	0.9
AE ∆% Feb-Mar	6.8
Jan	-0.6	0.7
AE ∆% Jan	-7.0
Dec 2013	0.3	0.7
AE ∆% Dec	3.7
Nov	-0.1	0.7
Oct	-0.1	0.6
Sep	-0.2	0.9
AE ∆% Sep-Nov	-1.6
Aug	0.5	0.9
AE ∆% Aug	6.2
Jul	-0.3	1.1
AE ∆% Jul	-3.5
Jun	0.2	0.9
May	0.1	0.8
AE ∆% May-Jun	1.8
Apr	-0.1	0.7
AE ∆% Apr	-1.2
Mar	0.8	1.0
Feb	0.3	1.0
AE ∆% Feb-Mar	6.8
Jan	-0.5	1.2
Dec 2012	0.3	1.3
Nov	-0.2	1.4
AE ∆% Nov-Jan	-1.6
Oct	0.2	1.9
Sep	-0.2	1.9
Aug	0.7	2.1
AE ∆% Aug-Oct	2.8
Jul	-0.5	1.9
Jun	0.0	1.9
May	-0.1	2.0
AE ∆% May-Jul	-2.4
Apr	0.1	2.1
Mar	0.8	2.3
Feb	0.4	2.3
AE ∆% Feb-Apr	5.3
Jan	-0.4	2.4
Dec 2011	0.4	2.5
AE ∆% Dec-Jan	0.0
Nov	0.3	2.5
Oct	0.3	2.4
Sep	-0.1	2.2
Aug	0.5	2.2
AE ∆% Aug-Nov	3.0
Jul	-0.5	1.9
Jun	0.1	2.1
May	0.1	2.0
AE ∆% May-Jul	-1.2
Apr	0.3	2.1
Mar	0.8	2.0
Feb	0.5	1.6
Jan	-0.2	1.8
AE ∆% Jan-Apr	4.3
Dec 2010	0.4	1.8
Annual
2014		0.5
2013		0.9
2012		2.0
2011		2.1
2010		1.5
2009		0.1
2008		2.8
2007		1.5
2006		1.6
2005		1.8
2004		2.1
2003		2.1
2002		1.9
2001		1.7
2000		1.7
1999		0.5
1998		0.7
1997		1.2
1996		2.0
1995		1.8
1994		1.6
1993		2.1
1992		2.4
1991		3.2

AE: Annual Equivalent Metropolitan France

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20150915

Chart IV-3 provides the consumer price index of France. There is the hump caused by speculative carry trades in 2008 from zero interest rates into derivatives of commodities and reversal of exposures during flight to the dollar and obligations of the US government (Cochrane and Zingales 2009). Inflation oscillated in waves along an upward trend and stabilized in current reversal of exposures in commodities in reallocations of portfolios among classes of risk financial assets.

Chart IV-3, France, Consumer Price Index, Jan 1998-Aug 2015, 1998=100

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20150915

Table IV-9 provides consumer price inflation in France and of various items in Aug 2015 and in the 12 months ending in Aug 2015. Inflation of all items was 0.3 percent in Aug 2015 and 0.0 percent in 12 months. Energy prices decreased 1.9 percent in Aug 2015 and decreased 5.1 percent in 12 months. Transport and communications decreased 0.6 percent in Aug 2015 and increased 1.5 percent in 12 months. Rentals and dwellings show 12-month increase of 0.9 percent. Services increased 0.2 percent in Aug 2015 and increased 1.5 percent in 12 months.

Table IV-9, France, Consumer Price Index, Month and 12-Month Percentage Changes of Index and Components, ∆%

Aug 2015	Weights	Month ∆%	12-Month ∆%
All Items	10000	0.3	0.0
Food	1662	-0.1	0.8
Manufactured Products	2584	1.6	-1.1
Energy	815	-1.9	-5.1
Petroleum Products	418	-4.8	-12.5
Services	4740	0.2	1.3
Rentals, Dwellings	767	0.1	0.9
Transport and Communications	510	-0.6	1.5

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20150915

The general consumer price index of France (IPC) and the core (ISJ) are in Chart IV-4 of the Institut National de la Statistique et des Études Économiques. There is decreasing trend of both indexes since 2012. The final segment shows mild rebound with current oscillations.

Chart IV-4, France, Consumer Price Index and Core Consumer Price Index

Note: IPC Headline Consumer Price Index; ISJ: Core Consumer Price Index

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20150915

The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-10. Annual equivalent inflation in the first four months of 2011 from Jan to Apr was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May 2011 at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov 2011 jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.7 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. In the ninth wave, inflation collapsed to zero in Sep-Oct 2012 and was minus 0.8 percent in annual equivalent in Sep-Nov 2012. In the tenth wave, annual equivalent inflation in Dec 2012 to Aug 2013 was 2.0 percent. In the twelfth wave, annual equivalent inflation was minus 3.2 percent in Sep-Nov 2013 during reallocations of investment portfolios away from commodity futures. In the thirteenth wave, inflation returned in annual equivalent 2.4 percent in Dec 2013-Jan 2014. In the fourteenth wave, annual equivalent inflation fell at 1.2 percent in Feb 2014. In the fifteenth wave, annual equivalent inflation was 1.8 percent in Mar-Apr 2014. In the sixteen wave, annual equivalent inflation was minus 1.2 percent in May 2014. In the seventeenth wave, annual equivalent inflation was 1.2 percent in Jun 2014. In the eighteenth wave, annual equivalent inflation was minus 1.2 percent in Jul 2014. In the nineteenth wave, annual equivalent inflation was 2.4 percent in Aug 2014. In the twentieth wave, annual equivalent inflation was minus 4.7 percent in Sep 2014. In the twenty-first wave, annual equivalent inflation returned at 1.2 percent in Oct 2014. In the twenty-second wave, annual equivalent inflation fell at 2.4 percent in Nov 2014-Jan 2015. In the twenty-third wave, annual equivalent rose to 2.4 percent in Feb-Jun 2015. In the twenty-fourth wave, annual equivalent inflation fell at 1.2 percent in Jul 2015. In the twenty-fifth wave, annual equivalent inflation was 2.4 percent in Aug 2015. There are worldwide shocks to economies by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html).

Table IV-10, Italy, Consumer Price Index

	Month	12 Months
Aug 2015	0.2	0.2
AE ∆% Aug	2.4
Jul	-0.1	0.2
AE ∆% Jul	-1.2
Jun	0.2	0.2
May	0.1	0.1
Apr	0.2	-0.1
Mar	0.1	-0.1
Feb	0.4	-0.1
AE ∆% Feb-Jun	2.4
Jan	-0.4	-0.6
Dec 2014	0.0	0.0
Nov	-0.2	0.2
AE ∆% Nov-Jan	-2.4
Oct	0.1	0.1
AE ∆% Oct	1.2
Sep	-0.4	-0.2
AE ∆% Sep	-4.7
Aug	0.2	-0.1
AE ∆% Aug	2.4
Jul	-0.1	0.1
AE ∆% Jul	-1.2
Jun	0.1	0.3
AE ∆% Jun	1.2
May	-0.1	0.5
AE ∆% May	-1.2
Apr	0.2	0.6
Mar	0.1	0.4
AE ∆% Mar-Apr	1.8
Feb	-0.1	0.5
AE ∆% Feb	-1.2
Jan	0.2	0.7
Dec 2013	0.2	0.7
AE ∆% Dec 2013-Jan 2014	2.4
Nov	-0.3	0.7
Oct	-0.2	0.8
Sep	-0.3	0.9
AE ∆% Sep-Nov	-3.2
Aug	0.4	1.2
Jul	0.1	1.2
Jun	0.3	1.2
May	0.0	1.1
Apr	0.0	1.1
Mar	0.2	1.6
Feb	0.1	1.9
Jan	0.2	2.2
Dec 2012	0.2	2.3
AE ∆% Dec 2012-Aug 2013	2.0
Nov	-0.2	2.5
Oct	0.0	2.6
Sep	0.0	3.2
AE ∆% Sep-Nov	-0.8
Aug	0.4	3.2
Jul	0.1	3.1
AE ∆% Jul-Aug	3.0
June	0.2	3.3
May	0.0	3.2
AE ∆% May-Jun	1.2
Apr	0.5	3.3
Mar	0.5	3.3
Feb	0.4	3.3
AE ∆% Feb-Apr	5.7
Jan	0.3	3.2
Dec 2011	0.4	3.3
AE ∆% Dec-Jan	4.3
Nov	-0.1	3.3
Oct	0.6	3.4
AE ∆% Oct-Nov	3.0
Sep	0.0	3.0
Aug	0.3	2.8
Jul	0.3	2.7
AE ∆% Jul-Sep	2.4
Jun	0.1	2.7
May	0.1	2.6
AE ∆% May-Jun	1.2
Apr	0.5	2.6
Mar	0.4	2.5
Feb	0.3	2.4
Jan	0.4	2.1
AE ∆% Jan-Apr	4.9
Dec 2010	0.4	1.9
Annual
2014		0.2
2013		1.2
2012		3.0
2011		2.8
2010		1.5
2009		0.8
2008		3.3
2007		1.8
2006		2.1

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/167890

Chart IV-5 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy with marginal increase followed by decline to 2.5 percent in Nov 2012, 2.3 percent in Dec 2012, 2.2 percent in Jan 2013, 1.9 percent in Feb 2013 and 1.6 percent in Mar 2013. Consumer prices increased 1.1 percent in the 12 months ending in Apr-May 2013 and 1.2 percent in Jun-Jul 2013. In Aug 2013, consumer prices increased 1.2 percent in 12 months. Consumer prices increased 0.9 percent in the 12 months ending in Sep 2013 and 0.8 percent in the 12 months ending in Oct 2013. Consumer price inflation increased 0.7 percent in the 12 months ending in Nov 2013 and 0.7 percent in the 12 months ending in Dec 2013. Consumer prices increased 0.7 percent in the 12 months ending in Jan 2014 and 0.5 percent in the 12 months ending in Feb 2014. Consumer prices increased 0.4 percent in the 12 months ending in Mar 2014 and 0.6 percent in the 12 months ending in Apr 2014. Consumer prices increased 0.5 percent in the 12 months ending in May 2014 and 0.3 percent in the 12 months ending in Jun 2014. Consumer prices increased 0.1 percent in the 12 months ending in Jul 2014 and fell 0.1 percent in the 12 months ending in Aug 2014. Consumer prices fell 0.2 percent in the 12 months ending in Sep 2014 and increased 0.1 percent in the 12 months ending in Oct 2014. Consumer prices increased 0.2 percent in the 12 months ending in Nov 2014 and changed 0.0 percent in the 12 months ending in Dec 2014. Consumer prices fell 0.6 percent in the 12 months ending in Jan 2015 and decreased 0.1 percent in the 12 months ending in Feb 2015. Consumer prices fell 0.1 percent in the 12 months ending in Mar 2015 and decreased 0.1 percent in the 12 months ending in Apr 2015. Consumer prices increased 0.1 percent in the 12 months ending in May 2015 and increased 0.2 percent in the 12 months ending in Jun 2015. Consumer prices increased 0.2 percent in the 12 months ending in Jul 2015 and increased 0.2 percent in the 12 months ending in Aug 2015.

Chart IV-5, Italy, Consumer Price Index 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

http://www.istat.it/en/

Consumer price inflation in Italy by segments in the estimate by ISTAT for Aug 2015 is provided in Table IV-11. Total consumer price inflation in Aug 2015 was 0.2 percent and 0.2 percent in 12 months. Inflation of goods was minus 0.2 percent in Aug 2015 and minus 0.4 percent in 12 months. Prices of durable goods increased 0.1 percent in Aug and increased 0.2 percent in 12 months, as typical in most countries. Prices of energy decreased 1.3 percent in Aug and decreased 6.4 percent in 12 months. Food prices increased 0.1 percent in Aug and increased 0.9 percent in 12 months. Prices of services increased 0.6 percent in Aug and rose 0.7 percent in 12 months. Transport prices, also influenced by commodity prices, increased 2.9 percent in Aug and decreased 0.1 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion and portfolio reallocations (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html).

Table IV-11, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%

Aug 2015	Weights	Month ∆%	12-Month ∆%
General Index All Items	1,000,000	0.2	0.2
I Goods	535,475	-0.2	-0.4
Food	176,032	0.1	0.9
Energy	93,467	-1.3	-6.4
Durable	73,312	0.1	0.2
Nondurable	70,570	-0.1	0.8
II Services	464,525	0.6	0.7
Housing	80,193	0.0	0.5
Communications	21,410	1.8	1.4
Transport	79,231	2.9	-0.1

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/167890

Inflation in the UK is somewhat higher than in many advanced economies, deserving more detailed analysis. Table IV-12 provides 12-month percentage changes of UK output prices for all manufactured products, excluding food, beverage and petroleum and excluding duty. The UK Office for National Statistics introduced rebasing for 2010=100 of the producer price index with important revisions (http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/producer-price-index-rebasing--2010-100-/index.html). The 12-month rates rose significantly in 2011 in all three categories, reaching 5.3 percent for all manufactured products in Sep 2011 but declining to 4.9 percent in Oct 2011, 4.6 percent in Nov 2011 and down to 1.3 percent in Jul 2012. Inflation of all manufactured products increased marginally to 1.7 percent in Aug 2012, 1.8 percent in Sep 2012, 1.9 percent in Oct 2012, 1.7 percent in Feb 2013, 1.5 percent in Mar 2013 and 1.0 percent in Apr 2013. Output prices increased 1.2 percent in the 12 months ending in May 2013, 1.7 percent in Jun 2013 and 1.8 percent in Jul 2013. Output price inflation was 1.5 percent in the 12 months ending in Aug 2013 and 1.2 percent in the 12 months ending in Sep 2013. Output price inflation was 0.8 percent in the 12 months ending in Oct 2013 and 0.8 percent in the 12 months ending in Nov 2013. Prices of output increased 1.0 percent in the 12 months ending in Dec 2013 and 0.9 percent in the 12 months ending in Jan 2014. Output prices increased 0.6 percent in the 12 months ending in Feb 2014 and 0.4 percent in the 12 months ending in Mar 2014. Output prices increased 0.6 percent in the 12 months ending in Apr 2014 and 0.5 percent in the 12 months ending in May 2014 down to minus 0.1 percent in Jul 2014. Output prices fell 0.3 percent in Aug 2014 and fell 0.5 percent in Sep 2014. Output prices fell 0.7 percent in Oct 2014 and fell 0.6 percent in the 12 months ending in Nov 2014. Output prices fell 1.1 percent in the 12 months ending in Dec 2014 and fell 1.8 percent in the 12 months ending in Jan 2015. Output prices fell 1.7 percent in the 12 months ending in Feb 2015 and declined 1.7 percent in the 12 months ending in Mar 2015. Output prices fell 1.7 percent in the 12 months ending in Apr 2015 and fell 1.6 percent in the 12 months ending in May 2015. Output prices fell 1.6 percent in the 12 months ending in Jun 2015 and fell 1.6 percent in the 12 months ending in Jul 2015. Output prices fell 1.8 percent in the 12 months ending in Aug 2015. Output price inflation is highly sensitive to commodity prices as shown by the increase by 6.7 percent in 2008 when oil prices rose over $140/barrel even in the midst of a global recession driven by the carry trade from zero interest rates to oil futures. The mirage episode of false deflation in 2001 and 2002 is also captured by output prices for the UK, which originated in decline of commodity prices (see Barsky and Killian 2004) but was used as an argument for unconventional monetary policy of zero interest rates and quantitative easing during the past decade. Arguments for symmetric up and down inflation targets are based on fear of deflation (Pelaez and Pelaez, International Financial Architecture (2005), 18-28, Pelaez and Pelaez, The Global Recession Risk (2007), 83-95.

Table IV-12, UK Output Prices 12 Months ∆% NSA

	All Manufactured Products	Excluding Food, Beverage, Tobacco and Petroleum	All Excluding Duty
Aug 2015	-1.8	0.1	-1.5
Jul	-1.6	0.2	-1.3
Jun	-1.6	0.1	-1.2
May	-1.6	0.1	-1.3
Apr	-1.7	0.1	-1.4
Mar	-1.7	0.1	-1.5
Feb	-1.7	0.3	-1.4
Jan	-1.8	0.5	-1.4
Dec 2014	-1.1	0.8	-0.8
Nov	-0.6	0.9	-0.5
Oct	-0.7	0.6	-0.5
Sep	-0.5	0.8	-0.2
Aug	-0.3	0.9	-0.1
Jul	-0.1	0.8	0.1
Jun	0.3	1.0	0.3
May	0.5	1.0	0.6
Apr	0.6	1.0	0.6
Mar	0.4	1.1	0.6
Feb	0.6	1.1	0.6
Jan	0.9	1.2	1.0
Dec 2013	1.0	1.0	1.1
Nov	0.8	0.7	1.0
Oct	0.8	0.8	1.1
Sep	1.2	0.8	1.4
Aug	1.5	0.9	1.7
Jul	1.8	0.9	2.0
Jun	1.7	0.9	2.0
May	1.2	0.8	1.5
Apr	1.0	0.8	1.4
Mar	1.5	0.9	1.5
Feb	1.7	0.7	1.7
Jan	1.6	0.8	1.6
Dec 2012	1.4	0.4	1.4
Nov	1.5	0.7	1.6
Oct	1.9	0.6	1.7
Sep	1.8	0.5	1.5
Aug	1.7	0.5	1.5
Jul	1.3	0.8	1.1
Jun	1.4	1.0	1.2
May	2.0	1.3	1.9
Apr	2.3	1.4	2.1
Mar	2.9	2.0	2.9
Feb	3.4	2.3	3.3
Jan	3.5	2.2	3.4
Dec 2011	4.0	2.6	3.9
Nov	4.6	2.6	4.4
Oct	4.9	2.9	4.7
Sep	5.3	3.1	5.2
Aug	5.2	3.2	5.0
Jul	5.2	2.8	5.0
Jun	5.0	2.8	4.9
May	4.8	3.0	4.6
Apr	4.9	3.0	4.8
Mar	4.7	2.5	4.4
Feb	4.4	2.5	4.2
Jan	4.0	2.4	3.7
Dec 2010	3.4	2.0	2.9
Year ∆%
2014	0.0	0.9	0.2
2013	1.3	0.9	1.5
2012	2.1	1.1	1.9
2011	4.8	2.8	4.6
2010	2.7	1.5	2.1
2009	0.5	1.4	-0.1
2008	6.7	3.6	6.8
2007	2.3	1.4	2.0
2006	2.1	1.5	2.0
2005	1.9	0.9	1.8
2004	1.1	-0.1	0.7
2003	0.6	0.0	0.6
2002	-0.1	-0.3	-0.1
2001	-0.2	-0.7	-0.3
2000	1.4	-0.4	0.8
1999	0.5	-1.1	-0.2
1998	0.1	-0.9	-1.0
1997	1.0	0.3	0.2

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

Monthly and annual equivalent rates of change of output prices are shown in Table IV-13. There are waves of inflation similar to those in other countries (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html). In the first wave, annual equivalent inflation was 10.0 percent in Jan-Apr 2011 with relaxed risk aversion in commodity markets. In the second wave, intermittent risk aversion resulted in annual equivalent inflation of 1.6 percent in May-Oct 2011. In the third wave, alternation of risk aversion resulted in annual equivalent inflation of 1.2 percent in Nov 2011 to Jan 2012. In the fourth wave, the energy commodity shock processed through carry trades caused the jump of annual equivalent inflation to 5.3 percent in Feb-Apr 2012. A fifth wave occurred in May-Jun 2012 with decline of output inflation at 3.5 percent annual equivalent in an environment of risk aversion that caused decline of commodity prices. A sixth wave under commodity shocks induced by carry trades from zero interest rates resulted in annual equivalent inflation of 3.7 percent in Jul-Sep 2012 and 3.0 percent in Jul-Oct 2012. In the seventh wave, annual equivalent inflation in Nov-Dec 2012 fell to minus 2.4 percent. In the eighth wave, annual equivalent inflation returned at 4.9 percent in Jan-Mar 2013. In the ninth wave, risk aversion returned with annual equivalent inflation of minus 0.6 percent in Apr-May 2013. In the tenth wave, annual equivalent inflation was 2.0 percent in Jun-Aug 2013. In the eleventh wave, annual equivalent inflation was -1.5 percent in Sep-Dec 2013. In the twelfth wave, annual equivalent inflation returned at 2.0 percent in Jan-Mar 2014. In the thirteenth wave, annual equivalent inflation was minus 0.7 percent in Apr-Aug 2014. In the fourteenth wave, annual equivalent inflation was minus 4.7 percent in Sep-Oct 2015. In the fifteenth wave, annual equivalent inflation was minus 4.3 percent in Nov 2014-Jan 2015. In the sixteenth wave, annual equivalent inflation was 1.5 percent in Feb-May 2015. In the seventeenth wave, annual equivalent inflation was minus 2.4 percent in Jun-Aug 2015.

Table IV-13, UK Output Prices Month ∆% NSA

	All Manufactured Products	Excluding Food, Beverage and Petroleum	All Excluding Duty
Aug 2015	-0.4	0.0	-0.3
Jul	-0.1	0.0	-0.1
Jun	-0.1	0.0	-0.1
∆% AE Jun-Aug	-2.4	0.0	-2.0
May	0.1	0.0	0.0
Apr	0.1	0.0	0.1
Mar	0.1	0.0	0.2
Feb	0.2	0.0	0.1
∆% AE Feb-May	1.5	0.0	1.2
Jan	-0.5	0.2	-0.3
Dec 2014	-0.5	0.0	-0.5
Nov	-0.1	0.2	-0.1
∆% AE Nov-Jan	-4.3	1.6	-3.5
Oct	-0.6	-0.2	-0.5
Sep	-0.2	-0.1	-0.1
∆% AE Sep-Oct	-4.7	-1.8	-3.5
Aug	-0.1	0.1	-0.1
Jul	-0.1	-0.1	0.0
Jun	-0.1	0.0	-0.2
May	-0.1	0.0	-0.1
Apr	0.1	0.0	0.0
∆% AE Apr-Aug	-0.7	0.0	-1.0
Mar	0.1	0.2	0.3
Feb	0.1	0.2	0.1
Jan	0.3	0.5	0.3
∆% AE Jan-Mar	2.0	3.7	2.8
Dec 2013	0.0	0.1	-0.1
Nov	-0.2	-0.1	-0.1
Oct	-0.3	0.0	-0.2
Sep	0.0	0.0	0.0
∆% AE Sep-Dec	-1.5	0.0	-1.2
Aug	0.1	0.0	0.1
Jul	0.3	0.1	0.2
Jun	0.1	0.0	0.1
∆% AE Jun-Aug	2.0	0.4	1.6
May	0.0	0.0	0.0
Apr	-0.1	0.1	0.0
∆% AE Apr-May	-0.6	0.6	0.0
Mar	0.3	0.3	0.3
Feb	0.5	0.2	0.5
Jan	0.4	0.3	0.4
∆% AE Jan-Mar	4.9	3.2	4.9
Dec 2012	-0.2	-0.2	-0.2
Nov	-0.2	0.0	0.0
∆% AE Nov-Dec	-2.4	-1.2	-1.2
Oct	0.1	0.0	0.1
Sep	0.3	0.1	0.3
Aug	0.4	0.0	0.4
Jul	0.2	0.1	0.2
∆% AE Jul-Oct	3.0	0.6	3.0
Jun	-0.4	-0.1	-0.4
May	-0.2	0.0	-0.1
∆% AE May-Jun	-3.5	-0.6	-3.0
Apr	0.4	0.2	0.1
Mar	0.5	0.1	0.5
Feb	0.4	0.3	0.4
∆% AE Feb-Apr	5.3	2.4	4.1
Jan	0.2	-0.1	0.2
Dec 2011	-0.1	0.1	0.0
Nov	0.2	-0.1	0.1
∆% AE Nov-Jan	1.2	-0.4	1.2
Oct	0.0	-0.1	-0.1
Sep	0.2	0.1	0.3
Aug	0.0	0.3	0.0
Jul	0.3	0.3	0.3
Jun	0.2	0.2	0.3
May	0.1	0.1	0.1
∆% AE May-Oct	1.6	1.8	1.8
Apr	1.0	0.8	0.9
Mar	1.0	0.4	0.9
Feb	0.5	0.2	0.5
Jan	0.7	0.3	0.7
Jan-Apr ∆% AE	10.0	5.2	9.4
Dec 2010	0.5	0.1	0.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

Input prices in the UK have been more dynamic than output prices until the current event of risk aversion and portfolio reallocations, as shown by Table IV-14, but with sharp oscillations because of the commodity and raw material content. The UK Office for National Statistics introduced rebasing for 2010=100 of the producer price index with important revisions (http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/producer-price-index-rebasing--2010-100-/index.html). The 12-month rates of increase of input prices, even excluding food, tobacco, beverages and petroleum, are very high, reaching 16.9 percent in Sep 2011 for materials and fuels purchased and 10.6 percent excluding food, beverages and petroleum. Inflation in 12 months of materials and fuels purchased moderated to 5.7 percent in Mar 2012 and 3.2 percent excluding food, tobacco, beverages and petroleum with the rates falling further in Apr 2012 to 1.5 percent for materials and fuels purchased and 1.1 percent excluding food, tobacco, beverages and petroleum. Input-price inflation collapsed in the 12 months ending in Jul 2012 to minus 2.5 percent for materials and fuels purchased and minus 2.5 percent excluding food, beverages and tobacco. Inflation returned at 0.7 percent in the 12 months ending in Aug 2012 but minus 2.6 percent excluding food, tobacco, beverages and petroleum. Inflation of input prices in Sep 2012 was minus 1.2 percent and minus 3.1 percent excluding food, beverages and petroleum. In Nov 2012, inflation of input prices of all manufacturing and materials purchased was minus 0.2 percent in 12 months and minus 1.6 percent in 12 months excluding food, tobacco, beverages and petroleum. Inflation of materials and fuels purchased in 12 months was 0.4 percent in Dec 2012 and minus 1.2 percent excluding tobacco, beverages and petroleum. Inflation of inputs returned with 1.6 percent in the 12 months ending in Jan 2013 and minus 0.2 percent excluding various items, increasing to 2.0 percent in Feb 2013 and 1.0 percent excluding various items. In Mar 2013, inflation of all manufacturing materials and fuels increased 0.9 percent in 12 months and 1.6 percent excluding various items. Prices of all manufacturing materials and fuels increased 0.3 percent in the 12 months ending in Apr 2013 and increased 0.9 percent excluding food and other items. Prices of all manufacturing increased 1.4 percent in the 12 months ending in May 2013 and 0.4 percent excluding various items. In Jul 2013, prices of manufactured products increased 4.7 percent in 12 months and 2.1 percent excluding food, tobacco, beverages and petroleum. In Aug 2013, prices of manufactured products increased 1.8 percent in 12 months and 1.4 percent excluding items. Inflation of input prices in the 12 months ending in Sep 2013 was 1.0 percent and 0.4 percent excluding items. Inflation collapsed in Oct 2013, with 0.0 percent for all manufacturing materials and fuels and minus 0.2 percent excluding various items. In Nov 2013, inflation of all manufacturing materials and fuels purchased fell 0.9 percent in 12 months and excluding items 1.0 percent. In Dec 2013, input prices for all manufacturing fell 0.9 percent in 12 months and fell 1.4 percent with exclusions. Inflation of all manufacturing fell 2.9 percent in the 12 months ending in Jan 2014 and 2.8 percent with exclusions. Inflation of input prices fell 5.8 percent in the 12 months ending in Feb 2014 and 5.1 percent with exclusions. Inflation of input prices fell 6.3 percent in the 12 months ending in Mar 2014 and 5.4 percent excluding items. In Apr 2014, inflation of input prices fell 5.3 percent in 12 months and 5.0 with exclusions. Inflation of input prices fell 13.8 percent in the 12 months ending in Aug 2015 and fell 5.4 percent with exclusions. There is comparable experience with 22.1 percent inflation of materials and fuels purchased in 2008 and 16.9 percent excluding food, beverages and petroleum followed in 2009 by decline of 5.7 percent for materials and fuels purchased and decrease of 1.3 percent for the index excluding items. UK input and output inflation is sensitive to commodity price increases driven by carry trades from zero interest rates. The mirage of false deflation is also observed in input prices in 1997-9 and then again from 2001 to 2003.

Table IV-14, UK, Input Prices 12-Month ∆% NSA

	All Manufacturing Materials and Fuels Purchased	Excluding Food, Tobacco, Beverages and Petroleum
Aug 2015	-13.8	-5.4
Jul	-12.6	-4.4
Jun	-13.0	-4.5
May	-12.4	-4.0
Apr	-11.1	-3.8
Mar	-13.1	-4.4
Feb	-13.5	-4.0
Jan	-14.1	-3.2
Dec 2014	-11.6	-2.3
Nov	-8.3	-1.7
Oct	-8.1	-2.4
Sep	-7.4	-2.7
Aug	-7.5	-4.0
Jul	-7.5	-5.2
Jun	-4.6	-3.5
May	-3.9	-3.9
Apr	-5.3	-5.0
Mar	-6.3	-5.4
Feb	-5.8	-5.1
Jan	-2.9	-2.8
Dec 2013	-0.9	-1.4
Nov	-0.9	-1.0
Oct	0.0	-0.2
Sep	1.0	0.4
Aug	1.8	1.4
Jul	4.7	2.1
Jun	3.0	0.0
May	1.4	0.4
Apr	0.3	0.9
Mar	0.9	1.6
Feb	2.0	1.0
Jan	1.6	-0.2
Dec 2012	0.4	-1.2
Nov	-0.2	-1.6
Oct	-0.2	-2.1
Sep	-1.2	-3.1
Aug	0.7	-2.6
Jul	-2.5	-2.5
Jun	-1.7	-1.0
May	0.3	-0.5
Apr	1.5	1.1
Mar	5.7	3.2
Feb	7.5	4.4
Jan	6.4	3.9
Dec 2011	8.6	5.0
Nov	12.8	7.6
Oct	13.4	8.1
Sep	16.9	10.6
Aug	15.6	10.9
Jul	17.6	10.7
Jun	16.4	10.3
May	15.3	9.3
Apr	16.9	10.2
Mar	13.5	7.8
Feb	13.9	9.2
Jan	13.2	9.6
Dec 2010	12.1	8.9
Year ∆%
2014	-6.6	-3.7
2013	1.2	0.4
2012	1.3	-0.2
2011	14.5	9.1
2010	8.0	4.7
2009	-5.7	-1.3
2008	22.1	16.9
2007	2.9	2.5
2006	9.8	7.2
2005	10.9	7.0
2004	3.4	1.7
2003	1.1	-0.7
2002	-4.5	-4.9
2001	-1.1	-1.2
2000	7.3	3.8
1999	-1.3	-3.6
1998	-8.9	-4.6
1997	-8.3	-6.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

Table IV-15 provides monthly percentage changes of UK input prices for materials and fuels purchased and excluding food, tobacco, beverages and petroleum. There are strong waves of inflation of input prices in the UK similar to those worldwide (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html). In the first wave, input prices rose at the high annual equivalent rate of 30.6 percent in Jan-Apr 2011, driven by carry trades from unconventional monetary policy into commodity exposures. Inflation of input prices was at 31.8 percent annual equivalent in Oct-Dec 2010. In the second wave, alternating risk aversion caused annual equivalent inflation of minus 1.3 percent in May-Oct 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of 0.0 percent in Nov-Dec 2011. In the fourth wave, annual equivalent inflation of input prices in the UK surged at 14.9 percent in Jan-Mar 2012 under relaxed risk aversion. In the fifth wave, annual equivalent inflation was minus 16.1 percent in Apr-Jul 2012 because of collapse of commodity prices during increasing risk aversion. In the sixth wave, annual equivalent inflation of materials and fuels purchased jumped to 23.9 percent in Aug 2012. In the seventh wave, annual equivalent inflation moderated to 3.0 percent in Sep-Dec 2012. In the eighth wave, annual equivalent inflation in Jan-Feb 2013 jumped to 24.6 percent. In the eighth wave, annual equivalent inflation of materials and fuels purchased was minus 9.5 percent in Mar-Jun 2013. In the ninth wave, annual equivalent inflation returned at 18.2 percent in annual equivalent in Jul 2013. In the tenth wave, annual equivalent inflation was minus 8.4 percent in Aug-Nov 2013. In the eleventh wave, annual equivalent inflation of manufacturing materials and fuels was 3.7 percent in Dec 2013. In the twelfth wave, annual equivalent inflation was minus 7.8 percent in Jan-Apr 2014. In the thirteenth wave, annual equivalent inflation returned at 2.4 percent in May 2014. In the fifteenth wave, annual equivalent inflation fell at 12.3 percent in Jun-Nov 2014. In the sixteenth wave, annual equivalent inflation fell at 34.4 percent in Dec 2014-Jan 2014. In the seventeenth wave, annual equivalent inflation increased at 6.6 percent in Feb-Apr 2015. In the eighteenth wave, annual equivalent inflation decreased at 17.9 percent in May-Aug 2015.

Table IV-15, UK Input Prices Month ∆% 

	All Manufacturing Materials and Fuels Purchased NSA	Excluding Food, Tobacco, Beverages and Petroleum SA
Aug 2015	-2.4	-0.6
Jul	-1.2	-0.3
Jun	-1.7	-0.4
May	-1.2	-0.2
∆% May-Aug	-17.9	-4.4
Apr	1.3	0.1
Mar	0.1	-0.7
Feb	0.2	-1.6
∆% Feb-Apr	6.6	-8.5
Jan	-3.6	-1.1
Dec 2014	-3.3	-0.9
∆% Dec-Jan	-34.4	-11.4
Nov	-0.8	0.0
Oct	-1.2	-0.1
Sep	-0.8	0.3
Aug	-1.0	0.3
Jul	-1.7	-0.3
Jun	-1.0	0.0
∆% Jun-Nov	-12.3	0.4
May	0.2	0.0
∆% May	2.4	0.0
Apr	-0.9	-0.3
Mar	-0.4	-0.4
Feb	-0.5	-0.7
Jan	-0.9	-0.7
∆% Jan-Apr	-7.8	-6.1
Dec 2013	0.3	-0.5
∆% Dec	3.7	-5.8
Nov	-0.6	-0.5
Oct	-0.4	-0.3
Sep	-0.9	-0.9
Aug	-1.0	-0.5
∆% Aug-Nov	-8.4	-6.4
Jul	1.4	1.1
∆% Jul	18.2	14.0
Jun	-0.3	-0.3
May	-1.3	-1.1
Apr	-1.9	-0.8
Mar	0.2	0.1
∆% Mar-Jun	-9.5	-6.1
Feb	2.5	1.5
Jan	1.2	0.6
∆% Jan-Feb	24.6	13.3
Dec 2012	0.3	0.0
Nov	0.3	0.3
Oct	0.5	0.4
Sep	-0.1	0.2
∆% Sep-Dec	3.0	2.7
Aug	1.8	0.0
∆% Aug	23.9	0.0
Jul	-0.3	-0.7
Jun	-1.8	0.2
May	-2.4	-0.6
Apr	-1.3	-0.1
∆% Apr-Jul	-16.1	-3.5
Mar	1.3	-0.5
Feb	2.2	0.4
Jan	0.0	-0.4
∆% AE Jan-Mar	14.9	-2.0
Dec 2011	-0.3	-0.7
Nov	0.3	-0.1
∆% AE Nov-Dec	0.0	-4.7
Oct	-0.5	-0.6
Sep	1.8	0.5
Aug	-1.5	0.3
Jul	0.5	0.7
Jun	0.2	0.8
May	-1.1	0.6
∆% AE May-Oct	-1.3	4.7
Apr	2.8	2.1
Mar	3.0	0.6
Feb	1.1	0.1
Jan	2.1	0.7
∆% AE Jan-Apr	30.6	11.0
Dec 2010	3.5	1.7
Nov	0.9	0.4
Oct	2.5	1.7
∆% AE Oct-Dec	31.8	16.3

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of manufactured products, shown in Table IV-16. There are contributions to 12-month percentage changes of 0.09 percentage points by tobacco and alcohol, 0.03 percentage points by computer, electrical and optical and 0.21 percentage points by other manufactured products. There are diversified sources of contributions to 12 months output price inflation such as 0.05 percentage points by clothing, textile and leather and deduction of 0.11 percentage points by transport equipment. Petroleum deducted 1.54 percentage points. In general, contributions by products rich in commodities are the drivers of price changes. There were diversified contributions in percentage points to monthly inflation: 0.29 percentage points deducted by petroleum and 0.08 percentage points deducted by food products.

Table IV-16, UK, Contributions to Month and 12-Month Change in Prices of All Manufactured Products, Percentage Points, NSA

Aug 2015	12 Months % Points	12 Months ∆%	Month  % Points	Month ∆%
Total %		-1.8		-0.4
Food Products	-0.45	-2.9	-0.08	-0.4
Tobacco & Alcohol	0.09	0.9	-0.01	-0.1
Clothing, Textile & Leather	0.05	0.4	0.04	0.3
Paper and Printing	-0.02	-0.5	-0.02	-0.3
Petroleum	-1.54	-18.4	-0.29	-3.2
Chemicals & Pharmaceutical	-0.09	-1.2	0.00	0.1
Metal, Machinery & Equipment	0.04	0.7	-0.01	-0.1
Computer, Electrical & Optical	0.03	0.2	0.01	0.0
Transport Equipment	-0.11	-1.0	0.01	0.1
Other Manufactured Products	0.21	1.5	-0.06	-0.3

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of input prices in Aug 2015, shown in Table IV-17. Crude oil is a large factor with deduction of 10.60 percentage points from the 12-month rate and deduction of 2.10 percentage points from the monthly rate in Aug 2015. Price changes also transfer to the domestic economy through the prices of imported inputs: imported metals deducted 1.23 percentage points from the 12-month rate and deducted 0.17 percentage points from the Aug rate. Domestic food materials deducted 0.65 percentage points from the 12-month rate and deducted 0.05 percentage points from the Aug rate. Exposures and reversals of commodity exposures in carry trades during risk aversion are a major source of price and financial instability.

Table IV-17, UK, Contributions to Month and 12-Month Change in Prices of Inputs, Percentage Points NSA

Jul 2015	12 Months % Points	12 Months ∆%	Month % Points	Month ∆%
Total		-13.8		-2.4
Fuel	0.09	0.9	-0.12	-1.0
Crude Oil	-10.6	-47.7	-2.10	-13.8
Domestic Food Materials	-0.65	-5.2	-0.05	0.4
Imported Food Materials	-0.47	-6.8	-0.22	-2.9
Other Domestic Produced Materials	0.10	3.5	-0.01	-0.2
Imported Metals	-1.23	-17.1	-0.17	-2.4
Imported Chemicals	-0.75	-5.6	0.00	0.0
Imported Parts and Equipment	-0.13	-0.8	0.18	0.9
Other Imported Materials	-0.17	-2.1	-0.01	0.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2015/index.html

Consumer price inflation in the UK is shown in Table IV-18. The CPI index increased 0.2 percent in Aug 2015 and changed 0.0 percent in 12 months. The same inflation waves (Section I and earlier http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html) are present in UK CPI inflation. In the first wave in Jan-Apr 2011, annual equivalent inflation was at a high 6.5 percent. In the second wave in May-Jul 2011, annual equivalent inflation fell to only 0.4 percent. In the third wave in Aug-Nov 2011, annual equivalent inflation returned at 4.6 percent. In the fourth wave in Dec 2011 to Jan 2012, annual equivalent inflation was minus 0.6 percent because of decline of 0.5 percent in Jan 2012. In the fifth wave, annual equivalent inflation increased to 6.2 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was minus 3.0 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation in Jul-Dec 2012 was 4.5 percent and 6.2 percent in Oct 2012 with the rate in Oct caused mostly by increases in university tuition payments. In the ninth wave, annual equivalent inflation was minus 5.8 percent in Jan 2013. In the tenth wave, annual equivalent inflation jumped to 4.3 percent in Feb-May 2013. In the eleventh wave, annual equivalent inflation was minus 1.2 percent in Jun-Jul 2013. In the twelfth wave, annual equivalent inflation was 3.4 percent in Aug-Dec 2013. In the thirteenth wave, annual equivalent inflation was minus 7.0 percent in Jan 2014. In the fourteenth wave, annual equivalent inflation returned at 4.5 percent in Feb-Apr 2014. In the fifteenth wave, annual equivalent inflation was minus 1.2 percent in May 2014. In the sixteenth wave, annual equivalent inflation was 2.4 percent in Jun 2014. In the seventeenth wave, annual equivalent inflation was minus 3.5 percent in Jul 2014. In the eighteenth wave, annual equivalent inflation was 2.0 percent in Aug-Oct 2014. In the eighteenth wave, annual equivalent inflation was minus 4.7 percent in Nov 2014-Jan 2015. In the seventeenth wave, annual equivalent inflation was 2.7 percent in Feb-May 2015. In the eighteenth wave, annual equivalent inflation was minus 1.2 percent in Jun-Jul 2015. In the nineteenth wave, annual equivalent inflation was 2.4 percent in Aug 2015.

Table IV-18, UK, Consumer Price Index All Items, Month and 12-Month ∆%

	Month ∆%	12 Months ∆%
Aug 2015	0.2	0.0
AE ∆% Aug	2.4
Jul	-0.2	0.1
Jun	0.0	0.0
AE ∆% Jun-Jul	-1.2
May	0.2	0.1
Apr	0.2	-0.1
Mar	0.2	0.0
Feb	0.3	0.0
AE ∆% Feb-May	2.7
Jan	-0.9	0.3
Dec 2014	0.0	0.5
Nov	-0.3	1.0
AE ∆% Nov-Jan	-4.7
Oct	0.1	1.3
Sep	0.0	1.2
Aug	0.4	1.5
AE ∆% Aug-Oct	2.0
Jul	-0.3	1.6
AE ∆% Jul	-3.5
Jun	0.2	1.9
AE ∆% Jun	2.4
May	-0.1	1.5
AE ∆% May	-1.2
Apr	0.4	1.8
Mar	0.2	1.6
Feb	0.5	1.7
AE ∆% Feb-Apr	4.5
Jan	-0.6	1.9
AE ∆% Jan	-7.0
Dec 2013	0.4	2.0
Nov	0.1	2.1
Oct	0.1	2.2
Sep	0.4	2.7
Aug	0.4	2.7
AE ∆% Aug-Dec	3.4
Jul	0.0	2.8
Jun	-0.2	2.9
AE ∆% Jun-Jul	-1.2
May	0.2	2.7
Apr	0.2	2.4
Mar	0.3	2.8
Feb	0.7	2.8
AE ∆% Feb-May	4.3
Jan 2013	-0.5	2.7
AE ∆% Jan	-5.8
Dec 2012	0.5	2.7
Nov	0.2	2.7
Oct	0.5	2.7
Sep	0.4	2.2
Aug	0.5	2.5
Jul	0.1	2.6
AE ∆% Jul-Dec	4.5
Jun	-0.4	2.4
May	-0.1	2.8
AE ∆% May-Jun	-3.0
Apr	0.6	3.0
Mar	0.3	3.5
Feb	0.6	3.4
AE ∆% Feb-Apr	6.2
Jan	-0.5	3.6
Dec 2011	0.4	4.2
AE ∆% Dec-Jan	-0.6
Nov	0.2	4.8
Oct	0.1	5.0
Sep	0.6	5.2
Aug	0.6	4.5
AE ∆% Aug-Nov	4.6
Jul	0.0	4.4
Jun	-0.1	4.2
May	0.2	4.5
May-Jul	0.4
Apr	1.0	4.5
Mar	0.3	4.0
Feb	0.7	4.4
Jan	0.1	4.0
AE ∆% Jan-Apr	6.5
Dec 2010	1.0	3.7
Nov	0.4	3.3
Oct	0.3	3.2
Sep	0.0	3.1
Aug	0.5	3.1
Jul	-0.2	3.1
Jun	0.1	3.2
May	0.2	3.4
Apr	0.6	3.7
Mar	0.6	3.4
Feb	0.4	3.0
Jan	-0.2	3.5

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/august-2015/index.html

Inflation has been unusually high in the UK since 2006, as shown in Table IV-19. There were no rates of inflation close to 2.0 percent in the period from 1997 to 2004. Inflation exceeded 2 percent from 2005 to 2013, reaching 3.6 percent in 2008, 3.3 percent in 2010, 4.5 percent in 2011 and 2.8 percent in 2012. Annual inflation in 2013 was 2.6 percent, declining to 1.5 percent in 2014.

Table IV-19, UK, Consumer Price Index, Annual ∆%

	Annual ∆%
1998	1.6
1999	1.3
2000	0.8
2001	1.2
2002	1.3
2003	1.4
2004	1.3
2005	2.1
2006	2.3
2007	2.3
2008	3.6
2009	2.2
2010	3.3
2011	4.5
2012	2.8
2013	2.6
2014	1.5

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/august-2015/index.html

Table IV-20 provides the analysis of inflation in Aug 2015 by the UK Office for National Statistics. In the rate of 0.2 percent for Aug 2015, clothing and footwear added 0.10 percentage points, furniture and household goods added 0.10 percentage points and transport added 0.02 percentage points. Contributions of percentage points to the 12-month rate of consumer price inflation of 0.0 percent are in the second column in Table IV-22. Food and nonalcoholic beverages deducted 0.27 percentage points, alcohol and tobacco added 0.09 percentage points, housing and household services added 0.05 percentage points while transport deducted 0.41 percentage points.

Table IV-20, UK, Consumer Price Index Month and Twelve-month Percentage Point Contributions to Change by Components

Aug 2015	Percentage Point Contribution 12 months to Aug	Percentage Point Contribution to Aug
CPI All Items ∆%	0.0	0.2
Food & Non-Alcoholic Beverages	-0.27	0.00
Alcohol & Tobacco	0.09	0.05
Clothing & Footwear	0.06	0.10
Housing & Household Services	0.05	0.01
Furniture & Household Goods	0.03	0.10
Health	0.04	0.00
Transport	-0.41	0.02
Communication	0.04	-0.01
Recreation & Culture	-0.13	-0.05
Education	0.22	0.00
Restaurants & Hotels	0.22	0.00
Miscellaneous Goods & Services	0.08	0.03
Rounding Effects	-0.02	-0.05

Note: there are rounding effects in contributions

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/august-2015/index.html

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015.