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Services CPI sees broad-based stickiness; FAT and NEIG softer than exp

UK DATA
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In terms of the drivers of the upside surprise to headline CPI: There were upside surprises in services but downside surprises in NEIG and FAT with energy in line with expectations.
  • Within services:
    • Restaurants and cafes saw a softer increase than last month - increasing 5.86%Y/Y, down from +6.16%Y/Y last month - this remained sticky showing probable passthrough from NLW increases and was a bit higher than we had expected.
    • Transport services added 0.03ppt, with air fares only a negligible contribution +0.01ppt to headline CPI's change.
    • Overall it looks as though the main driver of services surprising to the upside was pretty broad-based. There were no real notable huge increases - the falls in Y/Y terms versus April all seem to be a bit slower than both consensus and we had expected.
  • In other categories:
    • NEIG moved into negative territory on a Y/Y basis for the first time, -0.05%Y/Y, the softest print since October 2016 and below consensus expectations of 0.1-0.2%Y/Y (it was also down from +0.62%Y/Y last month).
    • FAT was a bit softer than consensus expectations - rising 3.25%Y/Y, down from 4.21%Y/Y in April (most analysts had expected 3.5-3.8%).
    • Energy was in line with expectations at -15.85% (from -16.71% in April).
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In terms of the drivers of the upside surprise to headline CPI: There were upside surprises in services but downside surprises in NEIG and FAT with energy in line with expectations.
  • Within services:
    • Restaurants and cafes saw a softer increase than last month - increasing 5.86%Y/Y, down from +6.16%Y/Y last month - this remained sticky showing probable passthrough from NLW increases and was a bit higher than we had expected.
    • Transport services added 0.03ppt, with air fares only a negligible contribution +0.01ppt to headline CPI's change.
    • Overall it looks as though the main driver of services surprising to the upside was pretty broad-based. There were no real notable huge increases - the falls in Y/Y terms versus April all seem to be a bit slower than both consensus and we had expected.
  • In other categories:
    • NEIG moved into negative territory on a Y/Y basis for the first time, -0.05%Y/Y, the softest print since October 2016 and below consensus expectations of 0.1-0.2%Y/Y (it was also down from +0.62%Y/Y last month).
    • FAT was a bit softer than consensus expectations - rising 3.25%Y/Y, down from 4.21%Y/Y in April (most analysts had expected 3.5-3.8%).
    • Energy was in line with expectations at -15.85% (from -16.71% in April).