MNI DATA ANALYSIS: UK Feb Inflation Ebbs As Stg Effect Fades>

-UK Feb CPI +2.7% y/y vs +3.0% in Jan

-UK Feb Input PPI +3.4% y/y vs +4.5% in Jan

-UK Feb CPIH +2.5% y/y vs +2.7% in Jan

-UK Jan House Price Index +4.9% y/y vs +5.0% in december

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - Consumer price inflation moderated dramatically in 

February, in line with the recovery in sterling over the same month a 

year earlier, while intermediate inflation also ebbed. 

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

month, the lowest rate since July of 2017, falling short of the MNI 

median forecast of 2.8%, after a 3.0% rise in January. 

     Consumer transport prices rose by 0.5% between January and 

February, or by 2.8% over February of 2016, a smaller rise than recorded 

in January. As a result, the transport sector accounted for 0.1 

percentage points in the fall in CPI.  

     Food prices rose by an annual pace of 3.3% last month, falling far 

short of the January gain, subtracting 0.06 percentage points from the 

change in CPI.  

     The result came below the Bank of England staff forecast of a 2.9% 

annual rise in February as reported in the February Quarterly Inflation 

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

twelfth straight month, just a day before the Bank's Monetary Policy is 

due to consider interest rates. 

     Members of the MPC agreed that monetary policy could tighten 

"somewhat earlier" and "by a somewhat greater degree" at their February 

meeting, but analysts believe a rate hike is more likely to come in May, 

with most predicting no change at Thursday's meeting. 

     Consumer prices rose by 0.4% between January and February, after 

falling by 0.5% between December and January, compared to the MNI median 

of a 0.6% monthly increase. 

     Stripping out food and energy, annual core consumer inflation 

declined to 2.4%, the slowest pace of increase since July of 2017, 

compared to the MNI median of 2.5%, down from the 2.7% pace recorded in 

January. 

     CPIH, which regained its status as a national statistic with the 

release of the July data, fell to an annual rate of 2.5% from 2.7% in 

January. CPIH had been downgraded as a national statistic, but the Bank 

of England continues to target CPI even with the recertification of 

CPIH. 

     Intermediate price inflation also receded, as the plunge in 

sterling following the vote to leave the European Union in June of 2016 

dropped out of year-on-year comparisons. Sterling rose by an annual rate 

of 1.8% in trade-weighted terms in February, reversing a 10.5% loss a 

year earlier. 

     Producer input prices slumped by 1.1% between January and February, 

for an annual gain of 3.4%, down from 4.5% in January and 19.3% in 

February of 2017. That's the slowest pace of increase since June of 

2016. Analysts surveyed by MNI forecast a 3.7% increase in producer 

input prices. 

     Imported material prices, which comprise some two thirds of inputs 

to the manufacturing sector, increased less intensely in February. The 

annual rate fell 0.6pp to 3.0%, below the 19.2% result a year ago. 

     Output PPI also moderated, registering no change between January 

and February, for a 2.6% annual gain, below the MNI median of a 2.8% 

rise, the lowest rate of increase since November of 2016. 

     Retail price inflation ebbed, with RPI rising by an annual rate of 

3.6% in February, down from a 4.0% pace in January, below the MNI median 

of 3.7% increase. That's the lowest rate since July of last year. 

     Stripping out mortgage interest payments, RPI-X rose by an annual 

rate of 3.6% in February, the lowest pace since March of 2016, after 

rising by 4.0% in January. 

     Meanwhile, UK house price inflation abated modestly in January, 

with the official House Price Index rising by an annual rate of 4.9%, 

down from the revised 5.0% annual pace recorded in December. That's the 

slowest pace of increase since September of 2017. 

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

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