uk cpi inflation

UK consumer inflation accelerated to 5.1% in November, coming close to turning peaks in 2008 and 2014 of 5.2%. Higher levels were last seen in Britain only in the early 1990s. The figures exceeded economists’ average estimates of 4.8%. Overall, the entire inflation data package exceeded expectations, posting a 14.3% y/y rise in producer input prices. Producer selling prices show a 9.1% YoY increase. Meanwhile, producers continue to pass the increased costs onto consumers to a large extent, as producer input prices added 1% for November, selling prices added 0.9%, and consumer prices added 0.7%. Yesterday we saw employers broadly maintaining the pace of wage growth until October, indicating that the inflationary spiral continues to unwind. This is a significant signal for the Bank of England, which on Thursday could give a clear call of a rate hike early next year. And it’s good news for GBP, which gets support on the decline to 1.32 earlier this week.

Summary: UK CPI inflation beat market expectations. UK CPI Inflation fell from its 40-year high reached in July. UK CPI Inflation Data Beat Market Expectations In August, the Bank of England and households experienced an unexpected - and presumably transitory - decrease in consumer price inflation for the first time in almost a year. Following a 40-year high of 10.1% in July, annual consumer price rise fell to 9.9% on Wednesday, according to the Office for National Statistics. This was the first decline since September 2021 and fell short of the 10.2% increase predicted by a Reuters poll. However, experts cautioned that inflation was anticipated to peak at approximately 11% in October, when a new home energy tariff cap begins, and that it might be difficult to decline because of underlying pressures and a new fiscal stimulus from the government. ⚠️BREAKING:*UK CPI INFLATION RISES 9.9% IN AUGUST, DOWN FROM 40-YEAR HIGH OF 10.1% 🇬🇧🇬🇧 pic.twitter.com/Lc5in4fnrW — Investing.com (@Investingcom) September 14, 2022 Following the passing of Queen Elizabeth, the British central bank decided to postpone raising interest rates until next Thursday. On September 22, the BoE is expected to increase rates by 0.75 percentage points to 2.5%, according to financial markets. With the exception of a temporary attempt to support sterling during a 1992 exchange rate crisis, this would be its largest rate increase since 1989. Despite a slowing economy at risk of recession, the majority of economists surveyed by Reuters believe a half-point increase is more plausible, and they also anticipate the BoE to keep raising rates into next year. A severe pressure on living standards has been brought about in Britain by the rise in European natural gas prices brought on by Russia's invasion of Ukraine, which has been compounded by post-COVID labor shortages and supply-chain bottlenecks. Inflation is lowest in several European nations, notably Spain and the Netherlands, but it is the highest among the G7's major advanced economies in the UK. Prime Minister Liz Truss's capping household energy costs The incoming Prime Minister Liz Truss's decision to cap household energy costs, which will increase by 25% rather than 80% in October, has made it marginally easier for the BoE to achieve its goal of returning inflation to its 2% objective, at least in the short term. Before the cap, analysts predicted that inflation may reach 15% or higher early the following year. In addition to promising other help and tax cuts, the government is anticipated to employ public borrowing to make up for the lower rates charged by energy providers. This is anticipated to cost approximately 100 billion pounds ($116 billion). According to experts, this additional stimulus for an economy that is nearly at full employment and experiencing the lowest unemployment rate since 1974 would prolong domestic inflation pressures and force the BoE to raise rates further in order to bring inflation back to its 2% objective. Sources: Reuters.com

Global Macro and Markets Global markets:  Equity sentiment turned sour again on Tuesday. US stocks fell, with consumer finance and regional banks towards the bottom of the pile. The S&P 500 and NASDAQ both fell by more than 1.1% though equity futures suggest a positive open later today. Chinese stocks also fell, despite yesterday’s rate cuts, as activity data turned even worse.  The CSI 300 fell 0.24% while the Hang Seng fell 1.03%. US Treasury yields were mixed yesterday. The 2Y yield lost 1.5bp taking it to 4.952%, while the 10Y yield put on 2bp to 4.258%. With yields not doing much aside from intra-day volatility, EURUSD is roughly unchanged from this time yesterday at just over 1.09. The AUD is weaker though, falling to 0.6456, responding to the weaker-than-expected wage-price numbers for 2Q23. Cable is slightly stronger at 1.2701, but the JPY is very slightly softer at 145.63, despite yesterday’s bumper GDP release for 2Q23. Regional Asian FX is weaker across the board. USDCNY jumped higher to 7.2884 on the bad macro news. The THB and VND were the region’s worst performers yesterday, responding to the negative China data. G-7 macro:  Yesterday’s US Retail sales figure was much stronger than forecast. Headline sales for July rose 0.7% against expectations for a 0.3% MoM rise. The core (control) figure rose 1.0% MoM. Not even a hint of a slowdown here. There was, however, a much weaker US Empire Manufacturing survey and some softer housing data (existing home sales and NAHB housing index). Today, the US releases more housing data (housing starts, building permits and mortgage applications) as well as industrial production. Production is expected to grow 0.3% MoM, with the manufacturing component remaining flat from the previous month.  We also get EU GDP data for 2Q23 – a 0.3% QoQ increase is the consensus forecast. And after stronger wage data yesterday, the UK will publish July CPI inflation numbers.   China:  New home price data for July are due out shortly. Last month, prices fell by a very marginal 0.06%. If the decline begins to accelerate, it will feed back on weaker consumer confidence and weigh on already feeble retail sales growth. New Zealand: The RBNZ is not expected to raise rates when they meet today, though they are expected to keep up their hawkish rhetoric and signal that rates will remain restrictive until well into 2024, despite the macroeconomy’s worsening situation.   What to look out for: Fed minutes and RBNZ meeting New Zealand RBNZ policy (16 August) US building permits, housing starts and industrial production (16 August) US Fed minutes (17 August) Japan trade balance (17 August) Singapore NODX (17 August) Australia employment report (17 August) Philippines BSP policy (17 August) US initial jobless claims (17 August) Japan CPI inflation (18 August) Malaysia GDP (18 August) Taiwan GDP (18 August)