MNI DATA IMPACT: UK November CPI Lower On Apparel Discounting

UK CPI fell sharply in November, dampened by heavy discounting on clothing, data released Wednesday by the Office for National Statistics, providing a major talking point for the Bank of England's Monetary Policy Committee which gathers for its final meeting of 2020 later on Wednesday.

Consumer price inflation slipped to an annual rate of 0.3% in November, well below analysts' forecasts of 0.6%, after a 0.7% rise in October. That's the 16th straight month that inflation has fallen below the BOE's target and the fourth consecutive month below 1.0%. With output likely to contract in the fourth quarter in response to economic lockdowns across much of the country, the MPC may be forced to act, either through word or deed.

Clothing and footwear prices subtracted 0.24 percentage points from the change in CPI, following unprecedented discounting in October. Prices fell by 2.7% between October and November, the biggest November since records began in 1988. Over the year to November, clothing and footwear prices plunged by 3.6%, the largest fall for any month since January of 2010. ONS officials cited anecdotal evidence that many retailers "were struggling to shift stock" last month.

Core inflation declined to an annual rate of 1.1%, the lowest since August, from 1.5% in October.

MISSING ITEMS

Some 72 items in the CPI basket (representing 17% of total spending) were unavailable last month, due to the economic lockdown that began on 5 November. Statisticians imputed the prices for the missing items, repeating the process employed over the spring. A retrospectively-produced series found CPI to be slightly lower once the unavailable items were excluded from the series. CPI excluding 74 unavailable items was 0.1 percentage point lower than the headline figure released for May, while CPI excluding 98 unavailable items for April fell 0.2 percentage points below the earlier-released headline number.

Intermediate price pressures remained subdued. Output PPI fell by an annual rate of 0.8%, the ninth-consecutive fall, extending a 1.4% decline in October. Input price deflation moderated, falling by an annual rate of 0.5% last month, the 10th-straight decline, after a 1.2% fall in October. Petroleum products and crude oil accounted for much of the decline in pipeline inflation. Excluding food, energy and other erratic items, core output PPI accelerated slightly to an annual rate of 0.9% from 0.7% in October.