Analysis of CPI, Inflation and Economic Factors in the UK

This report provides an analysis of the Consumer Price Index (CPI) and inflation within the UK. It begins by defining CPI and its importance in measuring inflation, then discusses supply-side factors influencing price levels, such as raw materials and food. The report includes statistical data on the UK's unemployment rate, comparing the mean, median, and mode to infer economic growth. It further examines the rising food prices in the UK and their impact on overall inflation, referencing relevant studies. The conclusion summarizes the increasing inflation rate, the influence of supply constraints, and the rising costs of raw materials and food, providing a comprehensive overview of the current economic situation. References from Ivanic et al. (2011), Jackson (2017), Leigh et al. (2010), and Martin et al. (2016) are included to support the analysis.

Consumer Price Index/
Inflation

Introduction
• Consumer price index is referred as the
measurement of changing of the price
level of consumer goods, whereas
inflation is the rising price level of the
economy over a given period of time.
More specifically, CPI is the most
popular measurement of inflation.
• According to Ivanic, Martin and
Zaman (2011), it is the weighted
average of the consumer goods and
services.
• It is an widely used economic
indicator, with which the inflation of
an economy can be measured.
• Inflation occurs due to the changes of
demand side and supply side factors.

Supply side factors: Raw
materials
• Price level trend of the raw
materials: With the rise of
the price of the raw
materials, the price level of
the final goods would be
increased.
• Supply of goods: The rise
in the price level of the raw
materials would lead to
reduce the supply of the
goods.

Statistics of the United Kingdom
• The mean value of the unemployment rate of the UK is
4.7%.
• The median value of the UK unemployment rate 7%, since it
is the middle value of last 10 year’s unemployment rate of
the country.
• 7.5% is the mode value since it is most frequently occurring
percentage of the UK unemployment rate of last 10 years
(Martin et al., 2016).
• Since, the average unemployment rate or the mean value is
much low compared to the mode value, therefore, it can be
inferred that the economy of the UK is growing.

Supply side factors:
Foods
• Price level: If the price
level of the foods would
be increased, then it
would maximise the
entire price level.
Jackson (2017) opined
that it is the reflection of
the cost push inflation.
• Trend of food prices in
the UK: The food prices
of the UK has been
growing after 2016
(Martin et al., 2016).

Conclusion
• Inflation rate across the UK has been rising
sharply with the passage of time.
• Rising of the price level of the economy is also
dependent upon the decrease of supply of
goods and hence, the cost of production of the
country has been rising.
• Both the price of raw materials and the foods
across the UK market has been increased.

Reference List
• Ivanic, M., Martin, W. and Zaman, H., 2011. Estimating the short-run
poverty impacts of the 2010-11 surge in food prices. The World Bank.
• Jackson, G., 2017. UK food prices rise at fastest rate in four years.
[online] Financial Times. Available at <
https://www.ft.com/content/84807466-c91d-11e7-ab18-7a9fb7d6163e
> [Accessed 12 January 2019].
• Leigh, D., Devries, P., Freedman, C., Guajardo, J., Laxton, D. and
Pescatori, A., 2010. Will it hurt? Macroeconomic effects of fiscal
consolidation. World Economic Outlook, 93, pp.124.
• Martin, R., Pike, A., Tyler, P. and Gardiner, B., 2016. Spatially
rebalancing the UK economy: Towards a new policy model?.
Regional Studies, 50(2), pp.342-357.