MNI DATA IMPACT: UK Feb CPI Lower On Apparel Discounting

UK CPI fell sharply in February, defying expectations of a modest increase, dampened by record-high plunge in clothing and footwear prices, data released Wednesday by the Office for National Statistics showed.

CPI slumped to 0.4% in February, down from 0.7% the previous month, confounding analysts' forecasts of an increase to 0.8%. That keeps inflation below the Bank of England's 2.0% target for the 19th-consecutive month. Core inflation declined to 0.9% from 1.4% in February, matching the outturn from last August. Core CPI has not been lower than 0.9% since June 2015.

Clothing and footwear prices plunged by 1.5% over the course of the month, the the first February fall since 2007 and the biggest since records began in 1988. Typically clothing prices rise in February as post-Christmas discounting tapers off. Clothing and footwear accounted for 0.17 percentage points in the decline in CPI.

Clothing and footwear comprise 7.4% of the CPI basket, up from 6.1% and the end of 2020, after the annual reweighing that attempted to apply Covid-era spending patterns to 2021data. The increase in clothing's weight reflects a decline in spending on service and entertainment activities, according to a national statistician.

The February outturn could make interesting reading for members of the Monetary Policy Committee. Minutes of last week's meeting suggested a range of views on the amount of slack in the economy. At the hawkish end of the spectrum, Chief Economist Andy Haldane has publicly warned of mourning inflationary pressures.

FACTORY GATE PRICES

However, factory gate inflation rose sharply, largely due to the rise in oil prices when compared with abnormally-low levels last year. Input price inflation jumped to an annual rate of 2.6%, the highest since April of 2019, from 1.6% in January. Output price inflation increased to an annual rate of 0.9% from 0.1% previously. Core output inflation slipped to 1.4% from 1.5% in January.

In addition to the annual reweightings, the ONS also published specific Covid-related monthly reweightings to back data. That series shows little change from the previously published numbers, with a reweighed December CPI just 0.03 percentage points lower than the headline figure of 0.6%. Reweighted outturns for earlier months all differ from published headline outturns by below 0.1 percentage points.