-Aug CPI +0.5 % m/m; +2.5% y/y vs Jul +2.6% y/y;
LONDON (MNI) – Consumer price inflation eased slightly in August,
but upward pressure from petrol and energy bills suggest it is likely to
come in above the Bank of England’s latest forecast.
Recent rises in crude oil helped to push fuel prices up in August
and further increases here coupled with higher electricity and gas
prices over the coming months could mean inflation doesn’t ease by as
much as the BOE is forecasting.
Figures from National Statistics showed the Consumer Prices Index
rose 0.5% on the month in August and was up 2.5% on the year, compared
with 2.6% in July. This was in-line with the median forecast from City
economists.
The largest upward contribution to the change on the month came
from fuel and air transport. Petrol prices rose 3.5 pence per litre on
the month, while airfares were up 10% between July and August which is a
typical seasonal move due to demand for flights in the summer.
There was also upward pressure from clothing and footwear where
prices rose 2.8% on the month, adding 0.18 percentage point to the
monthly change in the CPI.
In the August Inflation Report the BOE forecast inflation to ease
to 2.35% in Q3 and 2.19% in Q4. To meet the Q3 prediction then CPI would
have to be broadly flat on the month in September, below the 0.7%
rise last year.
Moreover, fuel bills are set to rise higher than the BOE expected
in Q4, with energy supplier SSE having led the way by announcing a 9%
increase in both gas and electricity prices from Oct 15.
Core inflation, which excludes energy, food, alcoholic beverages
and tobacco fell to 2.1% in August from 2.3% in July, below the median
forecast of 2.2%.
In his opening statement to the Inflation Report, BOE Governor
Mervyn King said inflation was likely to be “around or a little below
target for much of the forecast period” but he rejected the view further
stimulus was needed now.
“Towards the end of the forecast horizon the balance of risks to
inflation around the 2% target is broadly balanced. That in itself does
not suggest an urgent need for further action,” King said.
-London bureau: 0044 20 7862 7491; email: puglow@marketnews.com
[TOPICS: MT$$$$,M$B$$$,MABDS$]