MNI DATA ANALYSIS: PC Games, Transport Push UK July CPI Higher

--UK July CPI +2.5% y/y vs +2.4% in June 

--UK July Core CPI +1.9% y/y Unchanged vs +1.9% in June 

--UK July Input PPI +10.9% y/y vs +10.3% in June 

--UK July Imported Materials Prices +10.0% vs +9.2% in June 

--UK July CPIH +2.3% y/y Unchanged vs June 

--UK June House Price Index +3.0% y/y, smallest rise since August 2013

By Laurie Laird, Jamie Satchithanantham and Jai Lakhani

     LONDON (MNI) - Consumer price inflation accelerated in July, with a surge

in PC game prices and transport fares offsetting lower clothing prices.

     The consumer price index increased by an annual rate of 2.5% last month,

the joint-fastest pace since February and in line with the MNI median forecast,

after a 2.4% rise in June.

     The Games, Toys and Hobbies component,a sub-sector of the broader

recreation and culture category, provided the biggest upward contribution to CPI

in July.

     The sub-sector, driven almost entirely by volatile PC games prices,

contributed 0.11 percentage points to the annual 0.03pp July change. annual

     Consumer transport prices also rose on an annual basis in July, adding 0.05

percentage points to the change in annual CPI. The rise could be broken down

into increased rail fares (adding 0.02pp), road fares (0.01pp) and air fares

(0.01pp).

     As pin-pointed by MNI in a preview of the release, fuels and lubricants

also applied upward pressure, adding 0.02pp, with the 0.5% m/m fall smaller than

the 1.3% registered in July last year.

     Consumer prices were flat between June and July, registering no change

between between months for the second straight month.

     That takes inflation above the Bank's 2.0% target for the seventeenth

straight month, and provides at least some justification for the Bank's

somewhat-controversial decision to raise interest rates after the Monetary

Policy Committee meeting earlier this month.

     However, core inflation continued to flatline, raising questions about the

timing of the Bank's hike. Stripping out food and energy, annual core consumer

inflation held pace at 1.9%, the joint-lowest pace since March, in line with the

MNI median.

     Food and non-alcoholic beverage prices rose by an annual rate of 2.4%,

adding 0.03 percentage points from change in annual CPI.

     Extending clothing promotions in June, clothing and footwear continued to

weigh on CPI in July. The 0.4% y/y decline in prices was the first time the

12-month rate has been negative since October 2016.

     Also offsetting the upward effects were the removal of initial charges for

investments in some unit trusts.

     CPIH, which regained its status as a national statistic last year, was

unchanged at 2.3% in June.

     Intermediate price inflation also accelerated in July, courtesy of a 51.9%

annual rise in crude oil prices in July.

     Producer input prices jumped by 0.5% between June and July, for an annual

gain of 10.9%, the biggest gain since May 2017, after an 10.3% increase in June.

Crude oil accounted for 0.22 percentage points to the 0.6pp increase in the

annual rate for inputs between June 2018 and July 2018.

     Imported material prices, which comprise some two thirds of inputs to the

manufacturing sector, increased by an annual rate of 10.0% last month, extending

a 9.2% rise in June, but below the post-referendum high of 20.2% in January of

2016.

     Output PPI moderated, steady between June and July, for a 3.1% annual gain,

the smallest increase since May. Stripping out erratic components, core output

PPI also moderated on the month, rising by 2.2% y/y after a 2.4% rise in June.

     Retail price inflation ticked down on the month, with RPI rising by an

annual rate of 3.2% in July, down from a 3.4% pace in June. Stripping out

mortgage interest payments, RPI-X rose by an annual rate of 3.3% in July, after

rising by 3.4% in June.

     Meanwhile, UK house price inflation eased markedly in June, with the

official House Price Index rising by an annual rate of 3.0%, down from the 3.5%

annual pace recorded in May. That's the slowest pace of increase since August

2013 when prices also rose by 3.0%.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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