UK inflation: Long term structural pressure from China, but recent falls are driven by oil price

13/01/2015

Monogram Investment

  • 5.8% fall in energy CPI; excluding food and energy CPI is 1.3%, down from 1.8% in January 2014
  • Structural mismatch between Chinese manufacturing investment and Western demand means China is “exporting” deflation into the Eurozone

London, 13 January 2015. Paul Marson, Chief Investment Officer of Monogram, comments on today’s inflation figures and the root causes:-

Today’s figures reflect a sharp 5.8% fall in energy CPI over the past year.  Without the impact of oil prices on food and energy, underlying CPI remains a more plausible 1.3% year on year, up from 1.2% year on year in November.

In the long term, the UK faces the structural pressure of Chinese “exported deflation”. China’s manufacturing goods supply is growing much faster than Western and Chinese demand for manufactured goods. This means a glut of supply pushing down manufactured goods prices and western inflation in general.

China is a global price setter and its proportion of exports to the UK has grown significantly over the past decade, meaning that China will increasingly export deflation to the UK and the West.

Graph: UK Energy CPI

 Monogram Uk Energy Cpi

Graph: Chinese manufacturing sector supply/ Western demand mismatch

 Monogram Chinese Manufacturing Sectory Supply

-Ends-

For further information please contact:-

Charles Ansdell: +44 (0)207 382 4760

Redleaf: monogram@redleafpr.com

About Monogram

Monogram is an innovative investment management boutique founded in 2014, based in the heart of London’s financial district.  We preserve and maximize the wealth of high net worth families, endowments and foundations globally through prudent investment, independent counsel and a high level of personalized service. Monogram operates a low turnover, low cost; tax efficient approach to investing that is rooted in empirical evidence and rigorous testing. We are committed to putting our clients’ interests first and prudently investing their money, we design and manage portfolios with that in mind. For more information visit www.monograminvest.com.