UK Inflation Stronger Than Expected in Oct

OCT CPI 0.0 % M/M, +0.7% Y/Y VS +0.5% Y/Y SEP

OCT CORE CPI +0.2% M/M, +1.5% Y/Y VS +1.3% Y/Y SEP

OCT OUTPUT PPI 0.0% M/M; -1.4% Y/Y VS -1.6% Y/Y SEP

OCT INPUT PPI +0.2% M/M; -1.4% Y/Y VS -2.2% Y/Y SEP

Y/Y inflation edged up to 0.7% in Oct, beating market forecasts looking for an unchanged reading and marking the fifteenth reading below target. Core inflation rose to 1.5%, hitting a three-month high. Oct's uptick was mainly driven by clothing and footwear, adding 0.09pp to price growth and returning to their normal seasonal pattern following a distortion due to the pandemic. Food inflation increased by 0.6% in Oct following a Sep's dip of 0.1%. Additionally, transportation contributed positivity to CPI, adding 0.05pp to price growth with second-hand car sales rising in particular. These positive contributions have been partly offset by falling prices for energy (particularly gas and electricity) and recreation and culture (package holidays). Energy inflation dropped by 1.3% as a result of the changes to the Ofgem price cap. Output PPI fell by 1.4% y/y, while input PPI declined by 1.4%, marking the ninth consecutive decrease. Petrol and crude oil continue to show the largest negative contribution to producer price inflation.