UK Analysis: October Inflation Steadies; PPI Eases Sharply>

-UK Oct CPI +3.0% y/y vs +3.0% in Sept

-UK Oct Input PPI +4.6% y/y vs +8.1% in Sept

-UK Oct Imported Materials Prices +4.0% vs +7.7% in Sept

-UK Oct CPIH +2.8% y/y vs +2.8% in Sept

-UK Sep House Price Index +5.4% y/y vs +4.5% y/y in August

     By Laurie Laird and David Robinson 

     London (MNI) - Consumer price inflation steadied at a 

more-than-five-year-high in October, boosted by rising food prices, 

while intermediate inflation fell sharply to its lowest level in over a 

year. 

     The consumer price index increased by an annual rate of 3.0% last 

month, matching the September rise and equalling the fastest growth 

since March of 2012. 

     Food and non-alcoholic beverage prices jumped by an annual rate of 

4.0%, the biggest rise since September of 2013, adding 0.10 percentage 

points to the change in annual CPI. That was the ninth straight rise 

after 31 consecutive months of decline. 

     Rising vegetable prices accounted for much of the increase in food 

inflation, particularly the cost of premium crisps, according to a 

National Statistics official. 

     The result fell short of Bank of England staff forecast for a 3.2% 

annual rise in October, as reported in the November Inflation Report. 

The 3.0% outturn left inflation above the Bank's 2.0% target for the 

ninth straight month. 

     However, the Bank of England Monetary Policy Committee predicts 

that consumer price inflation peaked in October and will recede in 2018. 

     The MPC voted to raise Bank Rate to 0.5% at its November meeting, 

with members agreeing that any "future increases in [the] Bank Rate 

would be expected to be at a gradual pace and to a limited extent." 

     Consumer prices rose by 0.1% between September and October, after 

rising by 0.3% between August and September. 

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

release of the July data, steadied to an annual rate of 2.8%, unchanged 

from September. 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 fell sharply, with crude oil prices 

providing much of the downward pressure.  

     Producer input prices rose by 1.0% between September and October, 

for an annual gain of 4.6%, down from 8.1% in September and the lowest 

level since July of 2016. 

     Imported material prices, which comprise some two thirds of inputs 

to the manufacturing sector, increased by an annual rate of 4.0% last 

month, down from a 7.7% rise in September and the lowest rate since June 

of 2016. 

     Intermediate price inflation also receded as the plunge in sterling 

following the vote to leave the European Union in June of 2016 dropped 

out of the year-on-year comparisons. Sterling rose by an annual rate of 

3.5% in trade-weighted terms in October, recovering from an 18.4% loss a 

year earlier, and the first rise since January of 2016. 

     Output PPI also abated, rising by 0.2% between September and 

October, for a 2.8% annual gain, down from 3.3% in September and the 

lowest annual pace since November of 2016. 

     Stripping out food and energy, annual core consumer inflation held 

at an annual rate of 2.7% in October, matching the September and August 

outturns, steadying at the highest level since December of 2011. 

     Retail price inflation edged higher, with RPI rising by an annual 

rate of 4.0% in October, up from a 3.9% pace in September, that's the 

highest rate since December of 2011. 

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

rate of 4.2% in October, also the biggest increase since December of 

2011, after rising by 4.1% in September. 

     Meanwhile, UK house price inflation accelerted modestly in 

September, with the official House Price Index rising by an annual rate 

of 5.4%, up from the downwardly-revised 4.5% annual pace recorded in 

August. 

     For the second straight month, London recorded the slowest growth 

in the country, with prices rising by just 2.5%, compare to a 2.7% 

increase in August.   

     -London bureau: 44 (0) 203 865 3812; email: 

ukeditorial@marketnews.com 

[TOPICS: M$B$$$,MABDS$]