Latest Data: 24 April 2018

Price Data Indicates UK Inflation Set to Ease Further in April

  • Latest data suggests that the Official Consumer Price Index will fall below 2.5% when April data is released in May
  • World Price Index data for April can be used to gauge UK Consumer Price Inflation
  • Prices peaked in October 2017 but price inflation has slowed for 6 consecutive months

The World Price Index (WPI), based on local prices for a basket of commonly bought goods & services, shows a continued easing in the rate of UK price inflation in April.

Official inflation as reported by the Office of National Statistics for March contradicted the consensus that inflation would remain stable by slowing to 2.5% from 2.7% in February. Prices for a representative basket of goods and services as collected for the World Price Index has shown that mid-term prices in the UK peaked in October last year and have since been consistently slowing allowing consumer price inflation to ease. April data suggests that price inflation is set to slow further, potentially below 2.5%.

Prices rose immediately following the Brexit referendum in 2016 mainly caused by the weakening of the pound against the US Dollar. However, since mid-2017 the pound has been regaining some of its lost strength but the gap between price rises and foreign exchange rates has widened suggesting that despite a weakening in the US Dollar profit margins for UK companies are growing faster than market exchange rates and this is manifesting itself as consumer price inflation.

About the World Price Index
The World Price Index (WPI) measures the value of an urban selection of goods and services at purchasing power parity (PPP), reflecting the real purchasing power of different nations, allowing for rapid and accurate international price comparisons. Under/Over valuation data is based on the difference between the exchange rate value of a currency and that of the US Dollar in relation to the World Price Index calculated exchange rate. Based on WPI global data the degree of currency under or over valuation in PPP terms by country is provided in the table and chart below.


UK WPI vs ONS Consumer Price Index

GBP/USD FX Rate vs UK WPI over/under valuation

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Notes to Editors
  • The World Price Index is based on original data collected by World Economics.
  • The World Price Index is released during the 4th Working week of each month.
  • Latest month market exchange rates are calculated at the time of data collection.

About The World Price Index

The World Price Index is calculated monthly from a basket of internationally comparable goods and services. It is designed to alleviate the horrendous problems associated with analysing economic or market data using currency market exchange rates.

Exchange rates vary with extraordinary rapidity, frequently with little obvious link to economic reality, but fatally distorting the perception of value in markets and economies. It is vital when analysing international data, whether for market analysis purposes, or to allocate resources across the globe, to review data using an international yardstick of value. This can only be done using Puchasing Power Parities (PPP), which make allowance for the purchasing power of currencies within individual countries to make comparisons based on a standard currency, usually "international dollars".

There are various sources of PPP data, but most are of only academic interest as they are years out of date. The World Price Index is the only available index updated monthly to provide an easy way of reviewing trends or relative values of market or economic data in realistic terms.

About World Economics
World Economics is an organisation dedicated to producing analysis, insight and data relating to questions of importance in understanding the world economy. Its parent company Information Sciences Ltd has a long history of the development of key business information today used throughout the world, including the origination of the Purchasing Managers Indexes in Europe and Asia (now owned by Markit), and the development of WARC a global information provider for major corporations .

Currently our primary research objective is to encourage and assist the development of better and faster measures of economic activity. In cases where we believe we can contribute directly, as opposed to through highlighting the work of others, we are producing our own measures of economic activity.

Our work is mainly of interest to investors, organisations and individuals in the financial sector and to significant corporations with global operations, as well as governments and academic economists.

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