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MNI (London)
--UK December Inflation Data Due For Release Jan 16
By Jamie Satchithanantham
     LONDON (MNI) - The UK's final monthly inflation data print for 2017 will be
released Jan 16, when we will see if CPI built on or receded away from the
near-six-year high hit in November.
     Ahead of the release, we outline five themes we feel warrant particular
     - CPI Inflation rose to 3.1% in November with all components in the index's
basket appreciating in y/y terms, as has happened every single month since
March. November's outturn was the highest since March 2012 and was 0.1% higher
than the Bank of England MPC's official forecast. The BOE previously
communicated their belief that CPI would peak in October before trending back
towards 2.5% by mid-2018. 
     - Driving CPI inflation past the 3.0%-mark in November was the transport
sector and specifically air fares. Despite falling by 10.4% m/m in November, air
fares fell by more in November 2016 leaving the sub-component accountable for
+0.06pp of the +0.09pp change in overall CPI. Air fares have tended to jump in
December as people look to spend the festive season with their families -- the
average percentage change in December air fares over the past decade has been
+34.3% m/m and +7.71% y/y. Therefore, there is a strong chance air fares will
support inflation again in December. That said, this effect will be restrained
somewhat given the weight applied to air fares has fallen from 7/1000 in Dec
2016 to 5/1000 in Dec 2017.        
     - Recreation and Culture also came in strong in November. The category grew
3.1% y/y -- the strongest outturn since Jan 2010 -- driven by mainly by the
sales of computer games. Prices of PC games are heavily dependent on the
composition of the best seller charts at the time of ONS' survey and thus tend
to fluctuate a lot on a monthly basis. Prices of items within the Games, Toys
and Hobbies category (which captures PC games) have generally dropped on a m/m
basis in December and so some reversal of November's strong outturn could be on
the cards in December.   
     - One thing we do know for sure is that fuel prices will exert an upward
influence on CPI inflation in December. Petrol prices rose 0.71% between
November 2017 and December 2017 but fell 0.68% during the same period in 2016.
Diesel prices rose 0.62% between last November and December while were broadly
unchanged in between the same two months in 2016. The base effects from each of
these will mean that fuels will provide an additional 0.036pp to the monthly CPI
change in December.    
     - The Sterling Effective Exchange rose to its highest level since May in
November (77.7) and made up further ground in December, rising to 78.3. This
should have helped ease the rate of inflation on imported materials which
account for roughly two thirds of overall Input PPI. In November, imported
materials and fuels rose by 7.4% y/y after a 4.1% y/y rise in October.
     - December's BRC Shop Price Index (SPI) showed prices falling at a faster
rate compared to November, the fastest since March 2017 in fact. This was led by
a 2.1% fall in non-food prices, as retailers aimed to lure Christmas shoppers on
a stretched budget, and partially offset by a 1.8% rise in food prices. The
survey is not seasonally adjusted and thus is sensitive to promotions, weather
and other distorting effects. UK food retailer Sainsbury CEO Mike Coupe said Jan
10 supermarkets were "over the hump" of sterling driven inflation and food
prices were likely to fall in the next 6 to 9 months.
--MNI London Bureau; +44 203-586-2226; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |