UK Analysis: August CPI Up on Clothing; PPI Accelerates>

-UK Aug CPI +2.9% y/y vs +2.6% y/y in July

-UK Aug Input PPI +7.6% y/y vs +6.2% y/y in July 

-UK Aug Imported Materials Prices +7.5% y/y vs +5.8% y/y in July

-UK Aug CPIH +2.7% y/y vs +2.6% y/y in July

-UK July House Price Index +5.1% y/y Unchanged vs June 

     By Laurie Laird and Jamie Satchithanantham 

     London (MNI) - Consumer price inflation accelerated in August, 

courtesy of a jump in clothing prices, while intermediate inflation 

gained pace after six months of decline. 

     The consumer price index increased by an annual rate of 2.9% last 

month, matching the May outturn and last higher in April of 2012, 

exceeding the MNI median forecast of 2.7%, after a 2.6% rise in July. 

     Clothing and footwear prices jumped by 4.6%, the biggest rise since 

September of 1989, driven by unusually-large increases associated with 

the introduction of new autumn lines. Clothing and footwear prices rose 

by 2.4% between July and August, compared to a 1.0% increase in the same 

period of 2016, leaving clothing and footwear to account for 0.11 

percentage points of the change in annual CPI. 

     The result exceeded Bank of England staff forecast of a 2.7% annual 

rise in August, as reported in the August Quarterly Inflation Report. 

That takes inflation above the Bank's 2.0% target for the seventh 

straight month. 

     The stronger-than-expected August outturn could spark some lively 

discussion at Thursday's meeting of the Bank's Monetary Policy 

Committee, with some members voting for an immediate hike in rates at 

the last MPC meeting. 

     Consumer prices rose by 0.6% between July and August, after 

slipping 0.1% between June and July, compared to the MNI median of a 

0.5% monthly gain. 

     CPIH, which regained its status as a national statistic with the 

release of the July data, rose by an annual rate of 2.7% from a 2.6% 

pace in July. CPIH had been downgraded as a national statistic, but the 

Bank of England continues to target CPI even with the recertification of 

CPIH. 

     Intermediate price inflation accelerated after six straight months 

of moderation, courtesy of an increase in crude oil prices in August. 

     Producer input prices jumped by 1.6% between July and August, for 

an annual gain of 7.6%, matching the MNI median of 7.6%, up from 6.2% in 

July, but still below the post-referendum peak of 19.9% in January.  

     Imported material prices, which comprise some two thirds of inputs 

to the manufacturing sector, increased by an annual rate of 7.5% last 

month, after a 5.8% rise in July, the first gain after seven straight 

months of decline. Inflation in imported materials peaked at 20.2% in 

January. 

     Output PPI also accelerated, rising by 0.4% between July and 

August, for a 3.4% annual gain, topping the MNI median of 3.1%, after a 

3.2% gain in July. 

     Stripping out food and energy, annual core consumer inflation 

jumped to 2.7%, well above the MNI median forecast of a 2.5% rise, up 

from the 2.4% pace recorded in July. That's the highest pace of core 

inflation since December of 2011 when core CPI rose by 3.0%. 

     Retail price inflation also picked up pace, with RPI rising by an 

annual rate of 3.9% in August, up from a 3.6% pace in July, topping the 

MNI median of a 3.8% increase. That's the fastest pace of increase since 

January of 2012, when RPI rose by the same amount. 

     Stripping out mortgage interest payments, RPI-X rose by an annual 

rate of 4.1% in August, the biggest increase since December of 2011, 

after rising by an annual rate of 3.9% in July. 

     Meanwhile, UK house price inflation steadeid in July, with the 

official House Price Index rising by an annual rate of 5.1%, matching 

the revised increase recorded in June. House prices were originally 

reported to have increased by 4.9% in June. 

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com

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