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UK Inflation At Lowest Since 2015

UK DATA
MNI (London)

AUG CPI -0.4% M/M, +0.2% Y/Y VS +1.0% Y/Y JUL

AUG CORE CPI -0.6% M/M, +0.9% Y/Y VS +1.8% Y/Y JUL

AUG OUTPUT PPI 0.0% M/M; -0.9% Y/Y VS -0.9% Y/Y JUL

AUG INPUT PPI -0.4% M/M; -5.8% Y/Y VS -5.7% Y/Y JUL

Y/Y inflation decelerated to 0.2% in Aug, beating expectations projecting a flat reading and showing the lowest rate since late 2015. Core CPI dropped to 0.9%, down from 1.8% in Jul but stronger than forecasts which were looking for a fall to 0.5%. Aug's downtick was mainly driven by falling prices in restaurants and cafes due to the gov's "eat out help out" scheme. Annual prices for this category declined by 2.6%, the largest decrease on record and the first time it showed a -ve reading. M/M prices for restaurants and cafes were down 5.5%. Aug's release revealed falling prices for air fares for the first time since data was collected (2001) as fewer people travelled abroad. Moreover, clothing and footwear is not following seasonal patterns in 2020. Prices in this category tend to rise in Aug, however this year's uptick was smaller compared to Aug 2019, leading to the second largest negative contribution to price growth (-0.09pp). Output inflation recorded the fifth neg reading in Aug, driven by prices for petroleum products which revealed the largest downward contribution. The largest downward pressure to input inflation arose from crude oil prices.

MNI London Bureau | +44 203-865-3814 | irene.prihoda@marketnews.com

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