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Inflation upside surprise at least partly driven by transient factors

UK DATA
  • Looking at the key drivers of the CPI inflation beat, it does seem to be the components that were highlighted in the previews that have provided the upside surprise.
  • Transport the biggest upward contributor (adding 0.17ppt to the overall CPI Y/Y print). Part of this is due to airfares, the rest due to higher petrol prices.
  • Also restaurants and hotels added 0.05ppt - this was something that was lower than expected in the August data so has shown some bounceback.
  • So it looks as though the main driver of the surprise at first glance looks like at least partly due to a reversal of the transient factors that we saw in last month's data.
  • We noted in our preview that if the drivers of a beat were due to a reversal of these transient factors that although we may see GBP FX move higher, we may not get a sustained rally through the day - and the moves may not be backed up when SONIA / gilt markets open.
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