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UK DATA: BOE/Ipsos survey shows pick up in consumer inflation expectations

UK DATA
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  • The quarterly November BOE/Ipsos Inflation Attitudes Survey showed that year-ahead inflation expectations picked up for the first time since August 2023 to 3.0%Y/Y (from 2.7% in August 2024). This was the first release since the Autumn Budget so may indicate that consumers expect inflationary pressures from the increased employer NIC contributions and national living wage increases (as has been covered by many mainstream press reports).
  • Inflation in the 12 months after that (i.e. 1-2 years ahead) has also picked up to 2.8% in November from 2.6% in August.
  • More concerning for the MPC will be the increase in "longer-term" 5-year inflation expectations. These are now at 3.4%; the only time this has been above 3.4% since the beginning of 2020 was a 3.5% print in May 2022, when headline CPI was approaching double digits and still rising.
  • This is of course only one survey, but it is likely to ensure the MPC remains cautious regarding the pace of cuts in the near-term. As we noted earlier, we think that until there is more clarity on how much the employer NIC increases and national living wage rises filter through to wider wage growth and services inflation in April / May, it will be difficult to garner a consensus to speed up rate cuts from a quarterly pace.
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  • The quarterly November BOE/Ipsos Inflation Attitudes Survey showed that year-ahead inflation expectations picked up for the first time since August 2023 to 3.0%Y/Y (from 2.7% in August 2024). This was the first release since the Autumn Budget so may indicate that consumers expect inflationary pressures from the increased employer NIC contributions and national living wage increases (as has been covered by many mainstream press reports).
  • Inflation in the 12 months after that (i.e. 1-2 years ahead) has also picked up to 2.8% in November from 2.6% in August.
  • More concerning for the MPC will be the increase in "longer-term" 5-year inflation expectations. These are now at 3.4%; the only time this has been above 3.4% since the beginning of 2020 was a 3.5% print in May 2022, when headline CPI was approaching double digits and still rising.
  • This is of course only one survey, but it is likely to ensure the MPC remains cautious regarding the pace of cuts in the near-term. As we noted earlier, we think that until there is more clarity on how much the employer NIC increases and national living wage rises filter through to wider wage growth and services inflation in April / May, it will be difficult to garner a consensus to speed up rate cuts from a quarterly pace.