Price information in today’s revised UK GDP report suggests that domestically-generated inflation has picked up and is running above 2%.

GDP growth in the first quarter of 2015 was unrevised at 0.3%, with strong domestic demand offset by a large trade drag. The demand surge was partly due to inventories but this is not necessarily a negative for future expansion – firms may have stocked up in correct anticipation of a post-election rise in final spending.

Price information in the report has received less attention but is potentially more significant. The annual rise in the deflator for gross value added (GVA) – a measure of prices of domestically-produced goods and services before indirect taxes and subsidies – increased to 2.2%, the highest since the second quarter of 2013.

The GVA deflator, moreover, has been held down recently by the falling value of North Sea oil and gas output. The deflator excluding oil and gas rose by 2.7% in the year to the first quarter, the strongest annual gain since the second quarter of 2009 – see chart.

There is, in addition, a question mark about the deflator for government consumption, which is reported to have fallen by 0.8% in the year to the first quarter, despite public sector average earnings growth of 1.3%*. Excluding government consumption, the GDP deflator rose by an annual 2.5% last quarter. (The GDP deflator includes the impact of indirect taxes / subsidies.)

The rise in domestic inflation is consistent with faster monetary expansion since late 2011, allowing for the normal long lead from money to prices. The impact on CPI inflation has been swamped by commodity price weakness and sterling strength but a rapid rebound is likely in late 2015 and 2016 as these drags fade.

*Excluding public sector banks.