Dec UK Inflation Up On Clothing, Transport

DEC CPI +0.3 % M/M, +0.6% Y/Y VS +0.3% Y/Y NOV

DEC CORE CPI +0.3 % M/M, +1.4% Y/Y VS +1.1% Y/Y NOV

DEC OUTPUT PPI +0.3% M/M; -0.4% Y/Y VS -0.6% Y/Y NOV

DEC INPUT PPI +0.8% M/M; +0.2% Y/Y VS -0.3% Y/Y NOV

Y/Y inflation ticked up to 0.6% in Dec, beating market expectations looking for an increase to 0.5%. This marks the 17th straight reading below the BOE 2% target. Core inflation rose to 1.4% in Dec, showing a 2-month high and coming in slightly above forecasts (BBG: 1.3%). The largest upward contribution came from transport, clothing and footwear as well as recreation and culture. Clothing and footwear added 0.13pp to price growth and the ONS noted that clothing prices rose despite evidence of continued discounting. They further noted that more prices were recovering in Dec and that the change in the amount of items on sale was smaller in 2020 than in 2019. As some travel restrictions were eased in Dec, transport prices rose 1.9% in Dec, adding 0.13pp to price growth. These increases were partially offset by falling food prices in Dec, dropping 1.4% and shaving off 0.09pp from CPI growth. Output inflation declined by 0.4% in Dec, showing the 10th consecutive negative reading. Input inflation rose by 0.2% which was led by an upward contribution of metals and non-metallic minerals.