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5 years ago
Instant View - Inflation steady, producer prices undershoot forecasts in December
January 15, 2013 / 9:45 AM / 5 years ago

Instant View - Inflation steady, producer prices undershoot forecasts in December

LONDON (Reuters) - Inflation held at 2.7 percent for the third month running in December, in line with forecast as a rise in gas and electricity bills was curbed by falls in fuel costs.

KEY POINTS

- Highest annual rate of all goods CPI inflation since May

- Highest annual rate of core output PPI inflation since June

- First monthly fall in input prices since June

ECONOMISTS' REACTION

PETER DIXON

"There's nothing desperately exciting about these numbers. Obviously they were in line. We didn't get the sense there were any unexpected inflationary pressures from any category.

"But having said that, if you look at them in the round I think it's the seventh year in succession that the average inflation rate has been above the Bank of England's 2 percent target.

"Looking further ahead it looks likely that we'll get another inflation overshoot in 2013. It's entirely possible that by mid-year we'll get a very sharp spike in inflation back above 3 percent.

"So while the inflation numbers at the moment are not very exciting and they do seem to slip down the Bank of England's agenda, which is clearly focused on growth, there's no doubt that the inflation target itself continues to come in for a battering given what's been happening to prices not just in December but over a period of years."

ALAN CLARKE, SCOTIABANK

"Utility bills added about a quarter of a percentage point to inflation. Food was fairly punchy, but that's normal for this time of year.

"The fact that we didn't have much, if any, payback for the strong increase last month would suggest to me that we are in the early stages of food re-accelerating, but that will become more clear in the next couple of months.

"I think there is upside and we will get to 3 percent in the not too distant future. We are addicted to inflation."

PHILIP SHAW, INVESTEC

"There are no major surprises from the CPI. It could have been worse, and were it not for softer airfare inflation that would have been the case. But we would still say that he Governor will have to wire a letter at some stage during the year for missing the target by more than 1 percent.

"One of the drivers will be (higher) food prices coming through at the high street level for some time."

"There are no huge shocks from today's CPI and there is nothing that is likely to alter radically the outlook for mp. Our view is that the MPC will likely desist from sanctioning more asset purchases. But if the poor trend in various indicators continues, that could change."

"PPI figures are of some comfort for the inflation profile generally. We have seen a small fall in input costs on the back of the fall in crude oil prices. But the read through into CPI inflation is relatively small."

GEORGE BUCKLEY, DEUTSCHE BANK

"It's higher than we thought but 2.7 is in line with consensus. It's a relatively good number. If you look at the core as well that's down to 2.4 percent.

"PPI figures were also not too bad. We saw for example a fall in input prices. Core inflation was flat there. So that's encouraging for the future as well.

"It's still too high. It needs to come down further obviously. Maybe a negative output gap will help bring down inflation over the course of the next year. But for the moment it's remained sticky."

Reporting by UK economics team

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