UK consumers’ Inflation expectations have been at the highest for the past two decades.
CPIH(excluding energy, food, alcohol & tobacco). on a similar construct of Inflation Linked Swap curves (euro Area). Blue Line CPIH Forward Curve 5.7% 2023 last data, compared to 2013-2021 CPIH mode observation. Red Line Median CPIH (2013-2023) compared to 2013-2021 mode.
blue line utilizing the mode of the data set sees the CPIH Inflation curve not getting to 2.0% while instead if we take the median CPIH value from the past 3 years, construct a curve subtracted to the CPIH mode year data, the CPIH forward curve would get to 2.0% in 6YEARS, interesting to see how further down the curve CPIH Forward Inflation expectations would be rising again. in 6 to 8 Years’ time, the CPIH Forward Inflation Expectation curve would be rising between 2029-2031 to then decline fast.
CPIH forward curve inflation expectations. (Blue Line) Taken last data release 5.7% was subtracted from the mean average of CPIH year 2014-2021. (Red Line) Taken the average 2021/23 subtracted by the same observations average CPIH year 2014/2021. The average curve CPIH data series sees the forward curve Inflation expectations converging to 2.0% in 2Years time and slightly deviating from BoE Inflation aim, but broadly staying on target.
ONS Inflation data are very interesting
Food Inflation in the UK has increased from 12.9% to 19.8% in the period July’22, to March’23. In all the components of the food basket prices have seen sigmas of 2 to 4, which are large variances implying very volatile retail prices. Milk, Cheese, Eggs, Oils and Fats, Butter, have seen price increases of 26.9% and 28.2% on average in a 9-month data time series.
Energy Prices have been particularly atrocious. On average 81.5% increase for the Electricity,Gas and other Fuels basket. Gas prices have increased on average by 118%