U.K. inflation turned positive for the first time in four months in November largely driven by transport costs, while factory gate prices continued its downward trend on lower crude oil cost.
Consumer prices edged up 0.1 percent year-on-year in November, reversing a 0.1 percent fall in October, the Office for National Statistics said Tuesday.
The annual rate came in line with expectations. Inflation continues to remain well below the central bank’s 2 percent target.
Month-on-month, consumer prices remained flat after rising 0.1 percent in October. Prices were forecast to drop 0.1 percent.
At the same time, core inflation that excludes energy, food, alcoholic beverages and tobacco, rose slightly to 1.2 percent in November from 1.1 percent in October.
A slower pace of decline in transport cost contributed upwardly to the changes in consumer prices, while the largest downward contribution came from clothing and footwear as it dropped between October and November for the first time since records began in 1996.
With some slack still remaining in the economy and some more encouraging news on productivity, inflation will be going nowhere fast, Paul Hollingsworth, an economist at Capital Economics, said.
He expects inflation to average around 1 percent next year – meaning that the Bank of England will be in no rush to quickly follow the US Fed in raising interest rates.
IHG Global Insight Economist Howard Archer said he doubts that the UK will see renewed annual falls in consumer prices – although the current weakness in oil prices means that it cannot be ruled out.
Archer noted that gradually rising inflation over the coming months should be the consequence of base effects becoming less favorable, higher earnings growth, and diminishing excess capacity in the economy.
Another report from ONS showed that factory gate prices continued to fall since July 2014. Crude oil continued to drive down input prices, feeding through to a drop in output prices of petroleum products.
Output prices fell 1.5 percent year-on-year in November compared with a decrease of 1.4 percent in October. It was also larger than a 1.3 percent drop forecast by economists.
On a monthly basis, output prices slid 0.2 percent, while economists had forecast prices to fall 0.1 percent again as seen in October.
At the same time, input prices decreased 13.1 percent annually, bigger than a 12.3 percent decline seen in October and a 12.4 percent expected fall. Likewise, prices slid 1.6 percent on month following a nil growth in previous month.
The material has been provided by InstaForex Company – www.instaforex.com