MNI DATA ANALYSIS: UK Jan CPI At 2-Year Low, Below BOE Target>

-UK Jan CPI +1.8% y/y vs +2.1% in Dec

-UK Jan Core CPI unchanged at +1.9% y/y

-UK Dec House Prices +2.5% y/y, lowest since July 2013; London -0.6% y/y

By Laurie Laird and Jai Lakhani

     London (MNI) - Consumer price inflation plunged to a 24-month low 

in the first month of the year, falling below the Bank of England's 

target for the first time since early 2017, pulled lower by falling gas 

and electricity prices. 

     The consumer price index increased by an annual rate of 1.8% last 

month, the slowest pace since January of 2017, falling short of 

analysts' forecast of a 2.0% increase, after rising by 2.1% in December. 

     A cap on household energy prices -- mandated by the the utilities 

regulator Ofgem -- came into effect at the start of the year, dampening 

increases in gas and electricity costs. That subtracted 0.22 percentage 

points from the change in annual CPI. However, that cap is slated to 

rise in April.  

     Stripping out food and energy, core inflation steadied at an annual 

pace of 1.9%, matching the MNI median forecast, ticking above the 

headline rate of inflation for the first time since November of 2016. 

     Consumer prices fell by 0.8% between December and January, the 

biggest decline in a year, after rising by 0.2% between November and 

December, compared to the MNI median of a 0.7% monthly fall. 

     The result matched Bank of England staff forecast of a 1.8% annual 

rise in January, as reported in the February Quarterly Inflation Report. 

     That takes inflation below the Bank's 2.0% target for the first 

time since January of 2017, but Bank staff expect CPI to eventually 

settle above its target rate, according to minutes of the February 

Monetary Policy Committee meeting. 

     Fuel and lubricant prices also kept inflation in check, shaving 

0.08 percentage points from the change in CPI, as the effects of a sharp 

fall in crude oil prices over the autumn continued to feed into motoring 

costs. 

     Petrol prices declined by 2.1 pence a litre to an average of 119.6 

pence between December and January, after slipping by 1.1 pence a litre 

to 121.0 pence in the same period a year earlier. 

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

fell to an annual rate of 1.8% from 2.0% in December. 

     Intermediate price inflation also abated dramatically, courtesy of 

a 6.9% annual fall in crude oil prices in November. 

     Producer input prices declined by 0.1% between December and 

January, for an annual gain of 2.9%, the lowest since June of 2016, well 

below the MNI median of a 3.8% year-on-year rise, after an 3.2% increase 

in November. 

     Output PPI recorded no change between December and January, for a 

2.1% annual gain, the smallest increase since December of 2016, below 

the median forecast of a 2.2% yearly increase, down from 2.4% in 

December.  

     Core output PPI steadied at an annual pace of 2.4% in January for 

the third straight month, slightly above the MNI median forecast of a 

2.3% gain. 

     Retail price inflation also declined to multi-year lows, with RPI 

rising by an annual rate of 2.5% in January, the smallest gain since 

November 2016, down from a 2.7% pace in December, below the MNI median 

of a 2.6% increase. 

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

annual rate of 2.5% last month after rising by 2.7% in December. 

     Meanwhile, UK house price inflation continued to erode in December, 

with the official House Price Index rising by an annual rate of 2.5%, 

the slowest pace since July of 2013, from the revised 2.7% annual pace 

recorded in November.  

     London housing inflation continued to lag the rest of the country, 

with prices in the capital declining by 0.6%, matching the fall recorded 

in November. London prices have not enjoyed an annual increase for 10 

straight months, the longest stretch since the fifteen months to 

September of 2009. 

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

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