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Using EZ Flash core goods to estimate UK core goods inflation

INFLATION
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  • Eurozone flash inflation data is released well in advance of UK CPI data, so is there anything we can learn from it? We think there is, particularly if we look at the non-energy industrial goods (NEIG) group.
  • Looking at the non-seasonally adjusted data, it can be seen that there is a relatively weak correaltion between the two series. However if we seasonally adjust the series (we use the ECB's calculations for Eurozone and our own calculations for the UK), there is a much stronger correlation.
  • Over the last 10 months the median absolute difference between the seasonally adjusted flash EZ NEIG print and the UK NEIG print was 0.162%M/M (median 0.130%).
  • Comparing the consensus NEIG forecasts for Y/Y UK NEIG with outturns for UK NEIG leads to an absolute error of 0.225% (median 0.136%).
  • These two ways of looking at the data are not directly comparable, but it does show that even without any UK-specific overlays, it is possible to provide at least a rough estimate for UK NEIG using purely EZ flash NEIG as an input.

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  • Eurozone flash inflation data is released well in advance of UK CPI data, so is there anything we can learn from it? We think there is, particularly if we look at the non-energy industrial goods (NEIG) group.
  • Looking at the non-seasonally adjusted data, it can be seen that there is a relatively weak correaltion between the two series. However if we seasonally adjust the series (we use the ECB's calculations for Eurozone and our own calculations for the UK), there is a much stronger correlation.
  • Over the last 10 months the median absolute difference between the seasonally adjusted flash EZ NEIG print and the UK NEIG print was 0.162%M/M (median 0.130%).
  • Comparing the consensus NEIG forecasts for Y/Y UK NEIG with outturns for UK NEIG leads to an absolute error of 0.225% (median 0.136%).
  • These two ways of looking at the data are not directly comparable, but it does show that even without any UK-specific overlays, it is possible to provide at least a rough estimate for UK NEIG using purely EZ flash NEIG as an input.