Free Trial

MNI DATA IMPACT: UK CPI Outpaces Forecasts, But Below BOE Goal

LONDON (MNI)

UK CPI exceeded expectations in December, lifted by unexpected rises in clothing and transport costs, but remained stubbornly below the Bank of England's inflation target, the Office for National Statistics said Wednesday.

Consumer price inflation rose to an annual rate of 0.6% in December, topping analysts' forecasts of a 0.5% rise, accelerating from the 0.3% gain in November. Despite the increase, inflation remained below the bank of England's 2.0% target for the 17th-straight month, suggesting that persistently-low inflation will remain a concern for the Bank of England.

Tuesday's release is the last official inflation reading ahead of the Monetary Policy Committee meeting in early February. Clothing prices accounted for 0.13 percentage points of the gain in CPI, rebounding slightly from unusually-heavy discounting in November, when non-essential shops were closed to constrain the transmission of coronavirus.

Transport prices also contributed 0.13 percentage points to the rise in CPI, as the increase in airfares between November and December exceeded that of a year earlier. However, the rise may have been linked to the collection data of airfares, according to a National Statistics official.

Only nine items in the CPI basket were unavailable in December, up from 72 in November, when much of economy was shuttered. The ONS is no longer publishing an inflation index that excludes unavailable items but will update the index that reweighs the CPI to reflect Covid-economy spending next month. Core inflation increased to an annual rate of 1.4% from 1.1% in November.

Intermediate price pressures intensified slightly, with input PPI rising by an annual rate of 0.2%, the first increase after 10 straight months of decline. Non-EU imports of precious metals accounted for much of the upward effect. ONS officials suggested the supply bottlenecks and exchange rate issues may have contributed to the price increases.

Output PPI declined by an annual rate 0.4% last month, the 10th-straight decline, but the smallest fall since March. Excluding food, energy and other erratic items, core PPI rose by 1.2%, the biggest increase since September of 2019.

MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
True
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
True

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.