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Inflation surprises to the upside, driven by energy and food prices

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  • For UK CPI a 4 tenth upside surprise to Y/Y (2 tenth to M/M) while core a 1 tenth upside surprise to Y/Y.
  • The increase in the Y/Y rate is entirely driven by goods price increases (increasing from 13.2%Y/Y to 14.8%Y/Y in CPIH) - with services showing the same 5.3%Y/Y increase as in September.
  • Of that increase in goods prices, 2.9ppt of the increase is attributed to the EPG. So effectively if you took out the increase in energy prices, the inflation rate may not have risen in October.
  • Food inflation and petrol prices also helped push the headline inflation rate higher. Core inflation actually stayed static at 6.5%Y/Y. The gap between core and headline inflation rose from 3.6ppt to 4.6ppt.
  • So at first glance the details of the number don't look as bad as the headline increase suggests - more that analysts maybe didn't factor in the EPG changes correctly into their models.
  • In terms of market reaction GBPUSD barely moved while EURGBP moved around 30 pips higher.
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  • For UK CPI a 4 tenth upside surprise to Y/Y (2 tenth to M/M) while core a 1 tenth upside surprise to Y/Y.
  • The increase in the Y/Y rate is entirely driven by goods price increases (increasing from 13.2%Y/Y to 14.8%Y/Y in CPIH) - with services showing the same 5.3%Y/Y increase as in September.
  • Of that increase in goods prices, 2.9ppt of the increase is attributed to the EPG. So effectively if you took out the increase in energy prices, the inflation rate may not have risen in October.
  • Food inflation and petrol prices also helped push the headline inflation rate higher. Core inflation actually stayed static at 6.5%Y/Y. The gap between core and headline inflation rose from 3.6ppt to 4.6ppt.
  • So at first glance the details of the number don't look as bad as the headline increase suggests - more that analysts maybe didn't factor in the EPG changes correctly into their models.
  • In terms of market reaction GBPUSD barely moved while EURGBP moved around 30 pips higher.