Sunday, 26 February, 2017

Inflation rises to 1.8%: ONS

Prices of vegetables and pulses contracted 15.62% and 6.62% in January Consumer price inflation set to see upside pressure: Crisil
Cecilia Poole | 17 February, 2017, 00:21

A separate report shows USA consumer prices rose at the fastest pace in almost four years, with costs gaining six-tenths of a percent in January and 2.5 percent in the past year.

On the positive side, the upward potential for oil prices has so far proved to be limited, despite optimistic updates coming from the OPEC camp: earlier this month, the IEA praised the cartel for achieving a 90-percent compliance rate just one month into the six-month agreement.

The January Consumer Price Index (CPI) showed an inflation rate of 0.6 percent for the month, bringing the inflation rate in the overall index to 2.5 percent for the previous year.

"With input prices paid by United Kingdom manufacturers and output prices received by manufacturing businesses on the up, consumer price inflation is likely to rise further over the months ahead".

The gain was higher than a 5.5 percent rise in December and market estimates of 6.3 percent.

Sterling's slump against the United States dollar and the euro since the European Union referendum result, coupled with rising oil prices, also caused import prices to leap 20.2% over the period, the ONS said.

Last week, BoE rate-setter Kristin Forbes said she was beginning to become uncomfortable with the central bank's commitment to a neutral policy stance, arguing instead that interest rates may need to rise soon if price pressures continue to build.

Sterling fell below $1.25 and government bond prices rose after January's inflation reading came in slightly below expectations for a 1.9 per cent annual rise in a Reuters poll of economists, held back by a fall in clothing prices. Health care costs rose 0.2%. The latest rise was below analysts' expectations of a 1.9% rise, but is up from 1.6% in December and was just 0.3% this time past year.

"The latest rise in CPI was mainly due to rising petrol and diesel prices, along with a significant slowdown in the fall in food prices", Xinhua news agency quoted Mike Prestwood, head of inflation at ONS, as saying.

Margins for retailers also climbed sharply in January, though it is a volatile category that swings sharply from month to month and often skews the wholesale report. It was the largest monthly increase in over a year.

On Tuesday, Yellen hinted more rate increases were on the way as the jobs market has improved and inflation has shown signs of nearing the Fed's 2 per cent goal.

The euro meanwhile dropped by 0.1% to 1.0572 recording a one-month low in the middle of market uncertainty brought by weak economic data in the eurozone, Greek bailout, the presidential elections in France and ongoing political tension in different parts of the region.

China's massive imports of coal, crude oil, iron ore and industrial materials have helped fuel a sharp rebound in global resources prices in recent months, boosting profits for producers and processors.

Moreover, the department said, wholesale food prices were unchanged after climbing 0.5% in December.

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