Skip to main content

David Milliken / REUTERS

LONDON (Reuters) – British inflation eased off its post-Brexit vote high in December, official data showed on Tuesday, suggesting the financial squeeze on many households could be about to get a little bit easier.

Consumer price inflation fell for the first time since June, slipping to annual rate of 3.0 percent, as expected by economists, from November’s nearly six-year high of 3.1 percent.

Inflation jumped in Britain after voters decided in June 2016 to leave the European Union, a move that hammered the value of the pound and pushed up the cost of imports.

In the euro zone, inflation was just 1.4 percent in December, less than half the rate in Britain.

The combination of high inflation and slow wage growth – as well as uncertainty about the terms on which Britain will leave the EU in 2019 – is likely to mean that Britain again grows more weakly than other European economies this year.

Consumer price growth looks set to wane as the peak impact from sterling’s sharp fall in mid-2016 drops out of the data.

But the Office for National Statistics said it could not yet declare that inflation was definitely on the slide.

“It remains too early to say whether today’s slight fall is the start of any longer-term reduction in the rate of inflation,” James Tucker, an ONS statistician, said.

Tuesday’s official data showed growth in food prices slowed in December while airline fares rose less strongly than a year earlier, also pushing down on the overall inflation rate.

However, pressure in the pipeline grew as factory gate prices rose, confounding predictions of a fall.

LITTLE PRESSURE ON BOE
Lucy O’Carroll, chief economist with Aberdeen Standard Investments, said inflation might stay close to 3 percent for the next few months before drifting down later in the year as the impact of the pound’s decline falls out of the numbers.

“This slowing in inflation takes the pressure off the Bank of England to raise rates in the short term,” she said.

Sterling fell slightly against the U.S. dollar while government bond prices were little changed by the data.

The BoE has said it expects inflation peaked in late 2017 before falling slowly over the next three years to just above its 2 percent target. Many private economists think the fall could be faster, possibly to 2 percent this year.

The BoE is widely expected to keep interest rates unchanged at 0.5 percent next month as it waits for signs that wages are rising more quickly.

On Monday, BoE rate-setter Silvana Tenreyro said she felt the central bank had “ample time” to look at the impact of its rate hike in November – the first in more than a decade – before moving again.

The alternative measure of retail price inflation, which is used to calculate payments on government bonds and many commercial contracts, rose to a six-year high of 4.1 percent – pushed up by higher mortgage bills after the BoE rate hike.

Among manufacturers, the cost of raw materials – many of them imported – was 4.9 percent higher than in December 2016, down from 7.3 percent in November and the weakest increase since July 2016.

Economists polled by Reuters had expected input prices to rise by 5.4 percent.

But manufacturers increased the prices they charged by 3.3 percent compared with a rise of 3.1 percent in November, stronger than all forecasts in the Reuters poll.

–––––

(Reporting by William Schomberg and David Milliken; Editing by Hugh Lawson)

Copyright (2018) Thomson Reuters.

This article was written by William Schomberg and David Milliken from Reuters and was legally licensed BY AdvisorStream through the NewsCred publisher network.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.

Please Note: DWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to DWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Remember: If you are a DWM client, please contact DWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.

Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Join our newsletter

"*" indicates required fields

Name*