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MNI DATA IMPACT: UK March Inflation Lower, Data Pre-Lockdown

MNI (London)
By Laurie Laird
     LONDON (MNI) - UK inflation receded in March, reflecting early signs of the
coronavirus outbreak, even ahead of the national lockdown that took effect after
the collection of data for the current index readings.
     The following are the main points from the March report on consumer and
producer prices released Wednesday by the Office for National Statistics.
     - CPI retreated to an annual rate of 1.5%, in line with analysts'
expectations, falling below the Bank of England's 2.0% target for the eighth
straight month.
     - Crude oil prices plunged by 29.5% between February and March, the biggest
monthly fall on record, declining by 36.7% over the same period of 2019,
creating a significant drag on headline prices at both consumer and intermediate
level. That unprecedented decline in energy priced pre-dated lockdowns across
much of Europe, but reflect forecasts of a fall in crude demand following the
widespread lockdown in China and other Asian nations.
     - Petrol prices declined by 5.1 pence a litre between February and March,
after rising by 1.2 pence a litre in the same period of 2019, accounting for
0.16 percent of the fall in CPI.
     - Aside from petrol prices, which are compiled throughout the month, prices
for most items in the CPI basket were collected on or around March 17th, a few
days after the UK government advised citizens to remain at home, but nearly a
week ahead of the full lockdown announced on the evening of March 23rd.
     - Nonetheless, clothing retailers reported a change in sales patterns,
imposing a discount on 11.9% of items, up from 9.8% in February. That reverses
the historical pattern; typically discounting tapers off in March as new lines
arrive in stores (discounted items fell to 8.5% of the the total in March of
2019 from 10.7% in February). Clothing and footwear accounted for 0.09
percentage points of the fall in CPI.
     - Core CPI fell to 1.6%, higher than the 1.5% forecast, as airfares added
0.06 points to the change in total CPI.
     - Intermediate prices were heavily affected by the retreat in crude oil
prices. Input PPI declined by 3.6% between February and March and by 2.9% over
March of 2019. Output PPI rose by an annual rate of 0.3%, the smallest increase
since July of 2016.
     - The fall in the sterling effective exchange rate may have magnified the
effect of the oil price decline in PPI, with oil traded in dollars. Sterling
declined by 4.7 between February and March, the biggest fall since October of
2016, falling by 3.8% on an annual basis.
     - Statisticians declined to comment on how changes in price collection due
to the coronavirus could affect April inflation data. The ONS has avoided
sending officers into retail outlets that are trading during the lockdown and
has been relying on online responses, phone calls and the extraction of
equivalent prices from internet sites. The ONS will update further on collection
methods for CPI data in early May.
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: MABDS$,M$B$$$,M$E$$$,MT$$$$]
MNI London Bureau | +44 203-865-3812 |

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