MNI DATA ANALYSIS: UK Aug CPI Jumps on Rising Culture Costs>

-UK Aug CPI +2.7% y/y vs +2.5% in July

-UK Aug Core CPI +2.1% y/y vs +1.9% in July

-UK Aug Input PPI +8.7% y/y vs +10.3% in July

-UK July House Price Index +3.1% y/y, smallest rise since Aug 2013

-UK July London HPI down 0.7% y/y, largest fall since Sept 2009

    By Laurie Laird and Jamie Satchithanantham 

    London (MNI) - Consumer price inflation accelerated unexpectedly in 

July, lifted by rising costs of recreational products and services, 

providing some justification for the Bank of England's 

somewhat-controversial interest rate hike last month. 

     The consumer price index increased by an annual rate of 2.7% last 

month, the fastest pace since February, topping the MNI median forecast 

of 2.4%, after a 2.5% rise in July. 

     The recreation and cultural sub index surged by an annual rate of 

3.6% last month, the joint-highest pace of increase since April of 1992, 

adding 0.07 percentage points to the change in CPI. 

     Rising prices for theatre admissions accounted for a large portion 

of the increase, along with the cost of computer games, many of which 

are imported. That suggests rising price pressures stem from both 

domestic and international factors. 

     Cultural outlays account for 15.0% of the CPI basket, according to 

a National Statistics official, up from 14.4% in 2014. 

     Consumer prices rose by 0.7% between July and August, after 

registering no change between June and July, compared to the MNI median 

of a 0.5% monthly increase. That's the joint-biggest rise since April of 

2011. 

     The result exceeded Bank of England staff forecast of a 2.6% annual 

rise in August, as reported in the August Quarterly Inflation Report. 

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

eighteenth straight month, and appears to provide a degree of 

justification for the Bank's decision to raise interest rates after the 

Monetary Policy Committee in August. 

     Core inflation rose by a similar magnitude. Stripping out food and 

energy, annual core consumer inflation rose to 2.1%, above the MNI 

median of 1.8%, up from the 1.9% pace recorded in July. The 'wedge' 

between headline and underlying inflation remained at 0.6 percentage 

points, the biggest in approximately five years.  

     Consumer transport prices also exerted upward pressure on total 

inflation. Sea and air fares rose by a greater magnitude between July 

and August than during the same period of 2017, accounting for 0.06 

percentage points of the change in CPI. 

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

rose to an annual rate of 2.4% from 2.3% in July. 

     Intermediate price inflation decelerated, despite a continuing rise 

in crude oil prices and petroleum products over the past year. However, 

crude oil costs were flat between July and August, after rising by more 

than 7% in the same month a year earlier, exerting downward pressure on 

the annual rate of intermediate inflation. 

     Producer input prices jumped by 0.5% between July and August, for 

an annual gain of 8.7%, below the MNI median of a 9.2% year-on-year 

rise, after an 10.3% increase in July. 

     Imported material prices, which comprise some two thirds of inputs 

to the manufacturing sector, fell by an annual rate of 1.6% last month, 

after rising by 0.7% in July. 

     Output PPI also abated, rising by 0.2% between July and August, for 

a 2.9% annual gain, below the median forecast of a 3.0% yearly increase, 

down from 3.1% in July. 

     Retail price inflation also accelerated, with RPI rising by an 

annual rate of 3.5% in August, from a 3.2% pace in July, topping the MNI 

median of 3.3% increase. 

     Stripping out mortgage interest payments, RPI-X increased by an 

annual rate of 3.4% in August after rising by 3.3% in July. 

     Meanwhile, UK house price inflation abated in July, with the 

official House Price Index rising by an annual rate of 3.1%, down from 

the upwardly-revised 3.2% annual pace recorded in May. That's the 

slowest pace of increase since August of 2013. 

     London house prices declined by an annual rate of 0.7% in July, the 

only region to record an annual fall. That's the biggest decrease in the 

capital's housing costs since September of 2009. 

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com 

[TOPICS: M$B$$$,MABDS$]