British Consumer Price Index inflation is running at 4.4% - more than double the Bank of England’s target. But annual input price inflation figures signal that overall inflation may have topped out. The problem is this drop also signals a global economic slowdown, says Fleet Street Daily editor Ben Traynor…

I’m not a big fan of Metro “newspaper”, but I think their headline sums it up — ‘We are worse off’.

But… you knew there’d be a ‘but’, didn’t you? Dig a little deeper, and there is some good news to be found.

Well, at least it seems like good news at first blush. In actual fact, it confirms why I’m telling investors to avoid letting their portfolios be dragged down by Britain’s economy. My stance on that hasn’t changed. I’ll explain why, and what I am recommending, in just a second.

First, let’s dig into the numbers. Specifically, let’s look at the figures for output and input price inflation.

Output prices first. Year-on-year, output price inflation rose to 10.2% in July. No change in trend there. Factory gate inflation, as its known, is still on the rise. This is a clear sign that more consumer price inflation is in the pipeline.

But look at input prices - the cost of the raw materials used to make the outputs. Annual input price inflation fell from 30.8% in June to 30.1% in July.

Not an earth-shattering drop, I grant you. But it is a sign that inflation may soon top out. The run up in prices has been fuelled not by rising demand here but by the bull market in commodities. As raw materials became more expensive, it pushed up input prices, output prices and, at the end of the chain, consumer prices.

Higher prices are still working their way through. But what we know from the global commodities market - and not from the input price data - is that a breather is on the way.

Good news… or so you might have thought. There are two important points I want to make here.

The first is that while the inflation rate will fall back, the actual price level will remain high. Since I don’t expect wages to suddenly shoot up, living standards will not only fall - they’ll stay fallen.

And why don’t I expect wage growth to recover? Well, that brings me to the second point I want to make.

I had a chat with our commodities watcher Garry White this morning. He agreed with my thinking on why commodities prices have slipped. It’s not just speculators cashing out - there are fundamental concerns about real global demand.

The fear is that the whole world economy is heading for a slump. Those fears have hit commodities prices. This should put a limit on how high the rate of inflation gets.

But, sadly, this is scant consolation. Because Britain is right at the heart of the global slowdown.

It’s the nature of things in today’s economic climate that this silver lining comes with an even bigger cloud attached. Britain’s economic ills make it a bad place to do business. As a rule of thumb, if a company gets all its earnings from UK consumers and businesses, you should stay away.

UK consumers and businesses have less money than they had. And what they do have they’re scared to spend.

So what should you do? Well, we advise seeking out companies with established foreign earnings streams. Because while Britain is struggling, there are other economies that are still growing well.

That’s obviously what Tesco (LON:TSCO) is thinking. Today we read the supermarket is finally making its long-awaited move into India. It launched Fresh & Easy in the US last year, now it’s going after another huge market. Makes sense to me - now is not the time to have all your eggs in the UK basket.

But while Tesco is still getting its emerging markets pieces in play, we’ve found three companies that have already established their presence. They’re British companies, but - crucially - they have good exposure overseas.

Find out more about why we think these three stocks look well placed to weather the UK storm.

Source: This Is Why I Tell Investors, ‘Avoid Britain!’