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Services CPI reduces our subjective probability of June cut from 50% to 25%

UK DATA
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  • It looks as though "restaurants and cafes" have been a notable driver here. There was no slowdown in the 12-month CPI rate (remaining at 6.2%Y/Y while "accommodation services" increased from 6.0%Y/Y to 7.1%Y/Y - contributing +0.03ppt to headline CPI.
  • "Cultural services" increased from +5.4%Y/Y to +8.3%Y/Y contributing +0.07ppt to headline CPI.
  • There was also a 6.5%M/M increase in airfares (which led to a +2.3%Y/Y rate and contributed +0.03ppt to headline CPI).
  • We did get the expected tick down in "communication" which rose 3.4%Y/Y (7.3%Y/Y last month) and contributed -0.08ppt to headline CPI.
  • There was also a -0.12ppt contribution to headline Y/Y CPI from "recreation and culture."
  • In terms of the other categories, food was higher than the BOE's forecast at 2.8%Y/Y (BOE 2.529%), electricity and gas looked broadly in line, as did NEIG at first glance.
  • Overall, there are some potential one-off factors in this surprise - possibly from air fares, restaurants and hotels - part of that could be down to Easter effects. But even with those, this would have been a decent positive surprise to both consensus and the BOE's services CPI forecasts.
  • We think that based on this data it reduces our subjective expectation of a June first cut from around 50% to around 25% (we will confirm that later after looking at the data in more detail).
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  • It looks as though "restaurants and cafes" have been a notable driver here. There was no slowdown in the 12-month CPI rate (remaining at 6.2%Y/Y while "accommodation services" increased from 6.0%Y/Y to 7.1%Y/Y - contributing +0.03ppt to headline CPI.
  • "Cultural services" increased from +5.4%Y/Y to +8.3%Y/Y contributing +0.07ppt to headline CPI.
  • There was also a 6.5%M/M increase in airfares (which led to a +2.3%Y/Y rate and contributed +0.03ppt to headline CPI).
  • We did get the expected tick down in "communication" which rose 3.4%Y/Y (7.3%Y/Y last month) and contributed -0.08ppt to headline CPI.
  • There was also a -0.12ppt contribution to headline Y/Y CPI from "recreation and culture."
  • In terms of the other categories, food was higher than the BOE's forecast at 2.8%Y/Y (BOE 2.529%), electricity and gas looked broadly in line, as did NEIG at first glance.
  • Overall, there are some potential one-off factors in this surprise - possibly from air fares, restaurants and hotels - part of that could be down to Easter effects. But even with those, this would have been a decent positive surprise to both consensus and the BOE's services CPI forecasts.
  • We think that based on this data it reduces our subjective expectation of a June first cut from around 50% to around 25% (we will confirm that later after looking at the data in more detail).