Ch 3

INFLATION

Introduction to inflation

Introduction to inflation
 An increase in the amount of currency in
circulation, resulting in a relatively sharp and
sudden fall in its value and rise in prices.
 It may be caused by an increase in the
volume of paper money issued or of gold
mined, or a relative increase oil price.

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INFLATION
calculating a specific Inflation Rate
The formula for calculating Inflation is

((B - A)/A)*100

always as %

The Consumer Price Index - CPI

INFLATION

The Consumer Price Index - CPI

Old Price = 125

New Price = 150
CPI = 20%

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Inflation in Construction

Inflation in Construction
Why does the construction prices have a special inflated
trend?

What are the nature of causes of construction inflation

rates?

There is a number of very sound reasons for thinking that

construction inflation would continue to rise at a pace
faster than retail price inflation:

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Inflation in Construction
1. continued shortages of skilled workers and older
skilled workers retire

2. possibility that construction workers currently in the

UK and Eastern countries may return home as the
economies of those countries improve

3. continued high levels of demand for construction

materials from China and India

Inflation in Construction
4. continued requirements around health and safety,
likely to push up contractors’ costs

5. changes in building regulations, fire safety, energy

performance and the 2008 planning will involve
changes, pushing up costs through changes in building
design

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