• 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

 13.01.2015 UK Inflation Graph 1

Graph: Chinese manufacturing sector supply/ Western demand mismatch

13.01.2015 UK Inflation Graph 2

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