Stagflation UK

4 February 2008 By Ian Campbell

Gordon Brown s old songs of praise no longer seem appropriate for the UK economy as it sinks towards stagflation. The Bank of England might like to rescue growth and the housing market but inflation seems set to soar.

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The UK purchasing managers index produced by the Chartered Institute for Purchasing and Supply fell to 50.6 in January from a downwardlyrevised 52.4 in December. A reading below 50 reflects an economy contracting.

The new orders subindex fell to 49.7 from 51.3 in December. Export orders dropped to 47.6, from December's 51.6. The employment subindex fell to 48.3 from 51.4 in December.

Prices rose, however. The output prices subindex rose to 57.9, the highest since the survey began in 1999, from 55.6 in December, while input prices rose to 69.3, the highest since January 2005, from December's 64.5.

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