Amid the panic over the Indian variant this week it would have been easy to miss news that the Consumer Prices Index (CPI) more than doubled in a month, from 0.7 per cent in March to 1.5 per cent in April. That is still below the Bank of England’s 2.0 per cent target, but could this be just the beginning? The signs from this month’s Purchasing Managers’ Index (PMI) – a survey of businesses carried out by IHS Markit – suggests strong inflationary pressures. Its index for inflation expectations has soared to 58 this month – with anything above 50 indicating that businesses expect inflation to rise. It is higher than the 57 reached in 2008 – when, within months, CPI hit five per cent. Through the past 15 years inflationary expectations in the PMI have tended closely to lead the CPI fairly closely.
Inflation is rising because the economy is recovering strongly.
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