Bri­tish in­fla­tion slows de­spite slump­ing pound

Kuwait Times - - BUSINESS -

Bri­tish an­nual in­fla­tion sur­pris­ingly slowed in Oc­to­ber from a two-year high, data showed yes­ter­day, but it is widely ex­pected to ac­cel­er­ate in the com­ing months on the back of Brexit. The 12month in­fla­tion rate de­clined to 0.9 per­cent com­pared with 1.0 per­cent in Septem­ber, the Of­fice for Na­tional Sta­tis­tics (ONS) said in a state­ment.

That un­der­shot mar­ket ex­pec­ta­tions for a slight in­crease to 1.1 per­cent, as in­fla­tion­ary pres­sures sub­sided some­what on smaller-than-ex­pected hikes in the cost of cloth­ing and univer­sity tu­ition fees.

The ONS added that there was “no clear ev­i­dence” that the plunge in the value of the pound since the shock EU exit ref­er­en­dum was bump­ing up shop prices. How­ever, Bank of Eng­land gover­nor Mark Car­ney stressed that this did not change the over­all out­look for ris­ing in­fla­tion on the back of the Brexit-driven slump in the pound against the euro and dol­lar.

“In­fla­tion was lower than we ex­pected for the month of Oc­to­ber,” Car­ney ad­mit­ted in a grilling be­fore law­mak­ers. But he also warned that “in­fla­tion is go­ing up (and) that’s a con­se­quence of a very large move” in the ex­change rate.

And the ONS also re­vealed that the price of goods leav­ing fac­to­ries in Bri­tain jumped fur­ther last month-and partly blamed the slid­ing pound which has lifted im­ported raw ma­te­rial costs for UK firms.

Pro­duc­ers’ out­put prices ad­vanced 2.1 per­cent in Oc­to­ber from the same month a year ear­lier, ac­cel­er­at­ing from 1.3 per­cent in Septem­ber. That was the fourth con­sec­u­tive monthly gain, af­ter two years of fall­ing prices, and rep­re­sented the largest in­crease since April 2012.

“The in­crease in pro­ducer price in­fla­tion over the past sev­eral months can be partly at­trib­uted to the changes in the ster­ling ex­change rate,” the ONS noted.

Ris­ing pro­ducer prices sig­nalled mount­ing in­fla­tion­ary pres­sures, according to econ­o­mists. “To­day’s sur­prise fall looks like a blip, as ster­ling weak­ness con­tin­ues to raise the cost of in­puts for UK busi­nesses,” noted Ben Bret­tell, se­nior economist at stock­bro­ker Har­g­reaves Lans­down.

“It should be only a mat­ter of time be­fore this feeds into higher con­sumer prices. “The Bank of Eng­land now ex­pects in­fla­tion to hit 2.7 per­cent next year, but some an­a­lysts are pre­dict­ing it will reach 4.0 per­cent as ster­ling weak­ness pushes up im­port costs,” he added.

The pound tum­bled fol­low­ing Bri­tain’s shock June 23 vote in favour of leav­ing the Euro­pean Union, strik­ing 31-year dol­lar lows and 7.5-year troughs against the euro. — AFP

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